European shares score strong month but Catalonia weighs on Spain

* European shares end at three-month highs

* Weaker euro provides support

* Spain's IBEX lags on political worries

* VW slips on N.America settlement provisions (Adds closing prices, details)

By Helen Reid and Danilo Masoni

LONDON/MILAN, Sept 29 (Reuters) - European shares ended with the best monthly gain this year on Friday, helped by a weakening euro, but uncertainty over the Catalan crisis weighed on Spanish stocks.

A weakening euro has taken pressure off Europe's equities and especially the exporter-heavy DAX, helping investors find renewed enthusiasm for the asset class after the slow summer months.

Both the pan-European STOXX 600 and the euro zone stocks ended at three-month highs, up 0.5 and 0.7 percent respectively, scoring a quarterly gain after falling back in the second quarter.

"Europe is ticking more and more boxes," said Monique Wong, director of global markets at Coutts. "It's slightly slowed down with the appreciation of the currency but the euro is still a long way below previous highs."

Deutsche Bank analysts expect earnings for the STOXX to grow 11 percent this year, with the pick-up in global growth and rebound in commodities more than offsetting the negative effect of the stronger euro.

On Friday Volkswagen was in the spotlight after the latest twist in the carmaker's long-running diesel cheating scandal, when it said it was increasing provisions for settlements in North America.

Its shares fell as much as 4 percent before paring most losses and end down just 0.3 percent. Porsche, Volkswagen's controlling shareholder, also recovered, ending up 0.2 percent.

Investors have been weighing the pros and cons of investing in the autos sector, which is being hit as consumers begin to shun diesel and investments into electric vehicles gather pace.

But depressed valuations are tempting to some, including Goldman Sachs which upgraded autos to overweight in early September.

"It's a very unloved sector, at a 60 percent discount on price to earnings to the rest of Europe," said Sharon Bell, head of European equity strategy at the U.S. bank.

"The sector has been hit by the strength of the euro as well, given its export focus."

"CATALEXIT"?

Spain's IBEX rose 0.5 percent, reversing losses seen in the morning, as some brokers said worries over Catalonia were overdone, although uncertainty remained.

Catalonia's leader made clear his government was determined to go ahead with a Sunday vote on independence but Madrid insisted the referendum it has declared is illegal.

"The Catalan story confounds and worries us," said Swissquote analyst Yann Quellen.

"All things are possible: a win for ‘Catalexit’ or even a shutdown of voting by angry officials in Madrid... olé! Markets are not pricing in any risk for Sunday," he wrote in a note.

The Spanish blue chip index has gained 0.8 percent this month, underperforming the STOXX's 3.8 percent gain.

(Reporting by Helen Reid; Editing by Jeremy Gaunt)