* FTSEurofirst 300 gains 1.2 percent, up 0.5 percent on week
* Slew of U.S. macro data lifts mood
* Spain's tough 2011 budget soothes euro zone debt worries
* Takeover bid talk boost Burberry, ARM
* For up-to-the-minute market news, click on
By Blaise Robinson
PARIS, Sept 24 (Reuters) - European stocks reversed losses and staged a late rally on Friday, sparked by better-than-feared U.S. macro economic data that helped the market snap a three-day losing run and eke out a gain on the week.
Spain's tougher-than-expected 2011 budget also helped lift the mood, reassuring investors on the country's ability to deal with its debt.
Recently-hammered banks were among the top gainers, with Credit Agricole up 5 percent, SwedBank up 2.9 percent and Banco Santander up 2.8 percent.
The FTSEurofirst 300 index of top European shares closed 1.2 percent higher at 1,078.15 points, gaining 0.5 percent on the week.
U.S. data showed on Friday new orders for long-lasting U.S. manufactured goods excluding transportation gained ground last month while business spending rebounded and the supply of houses on the market tumbled to the lowest level in 42 years, pointing to an improvement in the economy after a recent soft patch.
"The headline figure for the durable goods data is soft, but looking at the details, a lot of sectors show resilience, which is a good sign," said Jean-Marc Lucas, economist at BNP Paribas in Paris.
"The U.S. economic recovery is losing steam, in part because of the end of the stimulus plans and the restocking process, but we don't think we're heading for a double dip."
The Euro STOXX 50, the euro zone's blue chip index, surged 2 percent to 2,792.75 points, piercing its 200-day moving average but remaining within a range started in late April.
Around Europe, UK's FTSE 100 index gained 0.9 percent, Germany's DAX index rose 1.8 percent, and France's CAC 40 added 1.9 percent.
Madrid's IBEX benchmark index surged 2.2 percent, as investors welcomed Spain's tough budget that confirmed the government's determination in its austerity drive.
M&A FEVER BOOSTS BURBERRY, ARM
"The euro zone debt fears have been on the back of people's minds for a while, and anything that can help soothe the worries is boosting the appetite for risk," a Paris-based trader said.
Telecom gear maker Alcatel-Lucent rose 7.5 percent, adding to its recent positive momentum sparked by bullish comments from executives.
In an interview with Reuters on Friday, Chief Financial Officer Paul Tufano said the company is increasingly confident it will meet the goals set in its turnaround plan, even as component shortages that have plagued the telecom gear industry are set to continue into 2011.
ARM Holdings gained 6.1 percent, after comments from Oracle Corp's chief executive revived bid speculation for the chip designer. Oracle's Larry Ellison said on Thursday he is keen to make more acquisitions to bolster the company's technology and a microchip firm could be a good fit.
Fashion firm Burberry climbed 6 percent, propelled by market talk of bid interest from a U.S. private equity firm, traders said.
Bucking the trend, Merck dropped 10.2 percent after a key European drug panel rejected its multiple sclerosis pill cladribine. (Reporting by Blaise Robinson; Editing by Hans Peters)