European shares and the euro rose on Friday on expectations debt-scarred Italy's first bond sale of the year would go well, but unease over Greece's debt swap deal and prospects for the broader euro zone economy capped gains, according to Reuters. The market mood was lifted on Thursday by a strong debt auction from Spain, tapping a flood of three-year loans to banks from the European Central Bank, which was cautiously optimistic on the region's outlook after leaving the door open to further interest rate cuts. The euro rose 0.3 percent to $1.2824, having climbed to as high as $1.2879 in Asian trading, and pulling further away from a 16-month low near $1.2662 hit earlier in the week. The FTSEurofirst 300 index of top European shares rose sharply at the open before easing back to a gain of 0.3 percent at 1,022.06 points by 0940 GMT. It reached a five-month high of 1,031.08 on Thursday before closing 0.3 percent lower. Banks were the main gainers, with the STOXX Europe 600 Bank index up 1.6 percent. The MSCI global index rose 0.4 percent. In a second key test in two days of market appetite for debt from the countries at the frontline of the euro zone crisis, Italy sells three-year bonds along with 2018 paper in an auction due at 1000 GMT. The difference between the rates it pays compared with benchmark German bonds - a key measure of investor confidence -narrowed early on Thursday, and a successful sale could see the spread shrink further. Italy's 10-year government bond was yielding around 6.5 percent on Friday compared to levels of around 7.0 percent before the Spanish debt auction. -- SPA
