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European Shares Seen Flat Ahead of Italian Bond Auction

European shares were called relatively flat Thursday after falls on Asian shares overnight as worries over an impending Italian debt auction persist.

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The FTSE was called higher by just 3 points, the DAX by 26 points and the CAC higher by 9 points.

Italy is to sell between 5 billion to 8.5 billion euros worth of government bonds at auction Thursday which is seen as a crucial confidence test for the Italian government. For much of this week Italian yields on 3 and 10 year bonds have been at record highs.

Unconfirmed reports from Europe suggest the German chancellor Angela Merkel and French president Nicolas Sarkozy will meet on January 9 to iron out the details to the fiscal pact agreed at this month’s summit.

In other news the Financial Times is reporting that a banking industry task force sponsored by the Federal Reserve is working on plans to reduce systemic risk in the banking industry. The paper reports that the changes could increase the financing costs for other banks.