European Shares Seen Higher, EU Leaders Seal Bond Support

European shares were called to open higher on Friday after European leaders agreed at a summit in Brussels to take emergency action to bring down Italy's and Spain's borrowing costs and to create a single banking supervisory body for the euro zone .

EU building flags brussels
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EU building flags brussels

The leaders also agreed to allowbanks to be recapitalized directly by the currency area's rescue fund without adding to government debt.

The FTSE was called to open 88 points higher at 5581, the DAX was seen opening higher by 115 points at 6264 and the CAC 40 was expected to open 74points higher at 3125.

European Council chairman Herman Van Rompuy said the EU would create a supervisory mechanism involving the European Central Bank by the end of this year, and break the "vicious circle" between banks and sovereign governments.

Asian shares surged following the announcement with Japan’s Nikkei 225 up 1.5 percent passing the 9000 mark for the first time since mid-May.

Merkel returns to Berlin on Friday where she faces a key vote in the country's parliament to approve the euro zone's new permament bailout mechanism. Voting begins at 5 pm CET. The bailout scheme cannot come into effect without German support.

In company news, Britain is expected expose the second scandal involving the country's banks in as many days.

The Financial Services Authority (FSA) will announce it has found evidence banks mis-sold products to protect small businesses against a rise in interest rates.

The news comes as Barclays chief executive Bob Diamondis clinging onto his job on Friday, having faced calls to resign on Thursday after the FSA slapped a record fine on the lender for rigging interest rates.

In a letter to the chairman of the UK parliament’s Treasury Select Committee chairman Andrew Tyrie, Diamond insisted that "all appropriate options will be pursued for those who have a case to answer".

The Times newspaper reported on Friday that the Royal Bank of Scotland is set to be fined about 150 million pounds ($232.59 million) for participating in offences similar to those engaged in by Barclays.

And Glencore’s finance director has moved shares worth 200 million pounds ($310.12 million) into trusts, at least one of which is based in Cayman Islands, as the commodity giant's merger with Xstrata stands on the verge of unraveling, according to Reuters.

Earlier in the week Qatar Holdings, Xstrata’s largest shareholder insisted Glencore sweeten its bid in order to win its support] for the takeover.