European Shares Set to Rise for 5th Session

European shares looked set to extend their winning streak to a fifth session Friday as investor sentiment got a boost from positive economic data from the U.S.

Sharon Lorimer

European shares hit a new 26-month closing high Thursday, as a fall in US jobless claims, as well as extended tax cuts, sparked optimism on growth in the world's biggest economy.

The European Central Bank's Financial Stability Review, published late on Thursday warned that the euro zone's financial situation was "fraught with risks" and implicitly accepted one or two EU countries would default next year.

That acceptance is one of the most important conclusions in the report, and could even be self-fulfilling, Gabriel Stein, Director at Lombard Street Research told CNBC's European Closing Bell.

"Some of these countries are insolvent... giving them more money just doesn't do anything," he said.

Fitch became the first ratings agency to strip Ireland of its 'A' credit status on Thursday, slashing it by three notches to BBB+ following the debt-stricken government's request for an EU/IMF bailout

As the European debt crisis continues to rattle investors' nerves, German Chancellor Angela Merkel and French President Nicolas Sarkozy meet in Germany on Friday to discuss the economy and employment.

The bilateral meeting comes ahead of a meeting of European Union heads of state in Brussels next week, when leaders will once again seek to find a way to stem panic on financial markets over the high levels of debt of some of European member states.

Commodity traders will turn their attention to the International Energy Agency which publishes its oil market report on Friday morning.

Among economic indicators due out on Friday are UK producer price numbers and figures for third-quarter gross domestic product in Italy and Austria.