European stock markets rose on Friday, extending their recovery following a mid-week slide, with attention still firmly fixed on Spain as it prepares to publish an audit of its stricken banks. The financial sector was in sharp focus also after Britain's financial regulator ruled that the key Libor interest rate needs a "complete overhaul" in the wake of the Barclays rate-rigging scandal. London's benchmark FTSE 100 index of top companies added 0.33 percent to 5,798.71 points in morning deals, as Frankfurt's DAX 30 climbed 0.42 percent to 7,320.63 points and in Paris the CAC 40 gained 0.14 percent to 3,444.23 ahead of the French budget. Madrid's IBEX 35 index advanced 0.41 percent. Stock markets began rebounding on Thursday as dealers brushed aside downbeat US growth data and took stock of a fresh Spanish austerity budget amid fears Madrid needs a full sovereign bailout. European equities had tumbled on Wednesday, with Madrid closing down almost 4.0 percent, on heightened concerns over a full bailout of debt-plagued Spain, and amid falling confidence in the US Federal Reserve's latest stimulus plan. "European markets and the euro are responding positively to Spain's pledge to meet its deficit target which could pave the way for an formal bailout," ETX Capital trader Ishaq Siddiqi said on Friday. In foreign exchange trade, the euro climbed to $1.2949 from $1.2911 late in New York on Thursday. Gold prices rose to $1,781.25 an ounce on the London Bullion Market from $1,763 on Thursday. "Looking ahead, Spain's bank stress test results are due, with markets expecting around 60 billion euros ($78 billion) of capital shortfalls for the sector," said Siddiqi. "Greece will also be in the spotlight after it reached a deal with coalition partners yesterday for a multi-billion euro bailout austerity plan." Elsewhere on Friday, shares in British banks rose after the Financial Services Authority argued that industry body the British Bankers' Association must be stripped of its role in setting Libor. The London Interbank Offered Rate (Libor) is a flagship instrument used all over the world, affecting what banks, businesses and individuals pay to borrow money. Euribor is the eurozone equivalent. Barclays was the first bank to be fined as part of a global probe into suspected manipulation of the twin interest rates that are crucial to the operation of short-term financing and global markets. In Friday trading, shares in Barclays jumped 2.0 percent to 221.65 pence. Banks were higher across Europe, with BNP Paribas up 1.49 percent to 38.46 euros in Paris and Spain's Santander gaining 1.15 percent to 5.98 euros. In Spain, the formulation of the 2013 budget and audit of the country's sick banking system is seen on the markets as one of the final acts before a sovereign bailout. The eurozone has already agreed to extend a rescue loan of up to 100 billion euros for a banking system bogged down by bad loans that piled up after a 2008 property crash. If Spain formally requests a broader sovereign bailout, it would become eligible to benefit from a bond-buying programme for troubled states, as outlined by the European Central Bank on September 6. That would curb Spain's borrowing costs, but to qualify Madrid would have to apply for help from the European Stability Mechanism -- and submit to its conditions. Spanish borrowing costs briefly bounced back above 6.0 percent this week, reaching a level deemed unsustainable for the country's finances. However, they held below the key level on Friday.