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European stocks close up 1% as oil spikes; Italian banks rebound

European markets closed higher Friday with investors reacting to price volatility in commodity markets and positive trade data from Germany.

Oil surges

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The pan-European STOXX 600 closed higher by 1.1 percent provisionally, down 0.4 percent for the week, with oil and gas stocks outperforming the wider benchmarks. Brent crude futures were up over 5 percent while U.S. crude futures were over 6 percent higher at Europe's close. This came on the fresh hopes over a proposed freeze in oil production.

"Yet again it's the price of oil that's driving the bulk of (the) rally," Tony Cross, a market analyst at Trustnet Direct, said in an afternoon note.

Banks rebound

Investors were also buoyed by decent trade data from Germany and reports that Italy's government is working on plans to help rescue four small banks in the country. This aided a rebound in the sector Friday, after it came under pressure earlier in the week, with banks like Banco Popolare surging 10 percent.

Unicredit finished up 9 percent after the Italian bank said the market will react positively to Banca Popolare di Vicenza's 1.76 billion euro ($2 billion) capital raise. Unicredit is the sole guarantor of Banca Popolare di Vicenza.

Meanwhile, the European Commission said it will cut the 445.884 million euro fine imposed on Societe General in December 2013 in relation to the Euribor case, sending shares of the French lender higher by 2.6 percent.

Central bank speak

The positive sentiment in Europe came after some key comments for global central bankers and some sharp moves for world currencies. On Thursday, Federal Reserve Chair Janet Yellen struck a less cautious tone about the U.S. economy in a speech, saying it was not a "bubble economy", adding that the labor market was "healing".

Overnight, Japan's Finance Minister Taro Aso said the country will take the "necessary measures" against what he dubbed the "one-sided" yen rises. Asian markets traded broadly lower overnight but Japan's Nikkei 225 rallied after his comments.

Early Friday morning New York Fed President William Dudley said a cautious, gradual approach to rate hikes was appropriate. He noted lingering external risks to the U.S. economy, despite some strength and signs of inflation domestically.

At the U.S. open stocks were higher, helped by the rally in oil prices and the comments from key Fed policymakers.

Telecom Italia rises

In individual stock news, shares of Telecom Italia finished 6 percent higher after the chief executive of Vivendi, which has a 24.9 percent stake in the company, said that Telecom Italia does not need to go to market for a capital raise to increase cash flow and investment.

Speaking to newspaper Il Sole 24 Ore, Arnaud de Puyfontaine declined to comment on a possible deal between Vivendi and Italian broadcaster Mediaset, saying that "our aim is to build a Latin media group with key telecom partners". Mediaset shares finished 5 percent higher.

Shares of airline Air France-KLM also ended in positive territory after the company reported an increase in passenger traffic in March.

And Goldman Sachs upgraded its outlook for Europe, Middle East and Africa steel, sending shares in steelmakers Arcelormittal and Voestalpine higher.

—CNBC's Evelyn Cheng contributed to this report.

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