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Europe Stocks to Rebound, Italy Votes on Austerity

European stocks looked set to open higher on Friday, tracking gains in Asian and U.S. trade, after a relatively positive Italian bond auction and the appointment of a new prime minister in Greece boosted investors’ confidence.

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US stocks closed higher in thin, choppy US trade, but ongoing worries about the euro zone limited gains.

Market rumors that France's triple-A rating could be placed on negative watch also dampened optimism. Rating agency Standard & Poor 's said "a technical error" caused a message about downgrading France to be sent and that it was investigating the issue. French Finance Minister Francois Baroin on Wednesday evening asked regulators to investigate the matter.

Meanwhile Italy has vowed to push ahead with the formation of a new government. Former European Commissioner Mario Monti has emerged as the frontrunner to lead an emergency government and replace Silvio Berlusconi.

Borrowing costs have soared for Italy in recent days, with yields on 10-year debt soaring to levels many fear are unsustainable.

Italy's Senate was set to vote on austerity measures Friday. The debate starts at 9.30 GMT and a vote is expected by the end of the day.

Berlusconi, who lost his majority in a vote on Tuesday night, has promised to resign after the measures are passed by both houses of parliament.

With approval by the lower house Chamber of Deputies expected on Saturday, President Giorgio Napolitano may accept Berlusconi's resignation as early as Saturday night, Reuters reported.

In Greece, newly-appointed Prime Minister Lucas Papademos will name his crisis cabinet on Friday.

Spanish telecoms group Telefonica reported a sharp drop in 9-month net profit, with earnings dented by a restructuring charge.

Italian bank Banco Popolare was among companies reporting third-quarter earnings on Friday.

Spain releases preliminary third-quarter GDP figures. UK October producer prices are also due.