European shares bounce back on political progress

LONDON, Nov 11 (Reuters): European shares bounced back on Friday on expectations that some political developments in highly-indebted Italy and Greece would pave the way for tough austerity measures that are crucial to contain the region's two-year-old debt crisis. Italy's Senate is set to vote on a package later in the day, with former European Commissioner Mario Monti emerging as favourite to replace Prime Minister Silvio Berlusconi. In Greece, prime minister designate, Lucas Papademos, will name a new crisis cabinet to roll out austerity plans. Encouraging US jobless claims data and trade numbers in the previous session also prompted investors to buy shares. Sentiment also improved after Italy sold 5 billion euros of 12-month treasury bills on Thursday in an auction which analysts said went better than feared. Yields on its 10-year bonds, which surged to 7.5 per cent this week, eased on Friday. "A successful Italian bond auction and a sense that much needed political change is progressing appears to be aiding sentiment," Keith Bowman, equity analyst at Hargreaves Lansdown, said. "In the background, supportive US economic data and a broader conclusion that the third quarter corporate results season was by no means a disaster also appears to be playing its part. At 0929 GMT, the FTSEurofirst 300 index of top European shares was up 0.6 per cent at 969.24 points after falling in the previous two sessions. Banks featured among the top gainers, with the sector index up 1.2 per cent, recovering after falls in the previous two sessions. The European banking sector is still the worst performer this year, with the sector index down 34 per cent on concerns that massive exposure of banks to sovereign debts would severely hurt their balance sheets. Insurers were also in demand, with the sector index gaining 0.8 per cent. Although equities made some progress on Friday, analysts said that the upward moves were not sustainable, and Europe faced several challenges on its journey to resolve the debt crisis that threatened a fragile global economic recovery.