Bund futures rose 21 ticks.

Italy faces a vote of confidence on its austerity package, but with Mario Monti's government enjoying an overwhelming majority in both houses of parliament, the vote should easily pass in the Chamber of Deputies this afternoon before it moves to the Senate.

Disappointment that last week's summit of European leaders failed to agree bold measures to halt the debt crisis and fears Standard & Poor's will downgrade some of all of the 15 euro zone countries it has on review kept investors cautious.

Surprising resilience in the U.S. economy and corporate sector are underpinning investor appetite for risky assets into the year end, although trading is thinning out ahead of a holiday season.

Thursday's U.S. data showed a fall in U.S. unemployment, a stronger-than-expected rise in regional factory activity and better-than-forecast results from FedEx Corp (FDX.N) which painted an improving picture of the economy.

MSCI world equity index .MIWD00000PUS rose 0.3 percent, after hitting a three-week low on Thursday.

European stocks .FTEU3 gained half a percent while emerging stocks .MSCIEF added more than 1 percent.

European banks .SX7P, the worst performer this year with losses of 35 percent, managed to rise in early trading even after Fitch Ratings downgraded some major banks on Thursday .

It cut credit ratings of banks including Barclays (BARC.L), Credit Suisse (CSGN.VX), BNP Paribas (BNPP.PA) and Deutsche Bank (DBKGn.DE) citing "increased challenges" in financial markets.

U.S. crude oil was up 0.1 percent at $93.97 a barrel.

The dollar .DXY was steady against a basket of major currencies. The euro was slightly down on the day at $1.3009.

"France is the biggest worry. The spread on its bond yields versus German Bunds has widened since the beginning of the crisis and if it loses its triple A credit rating, the crisis may start engulfing the euro zone core," said Michiyoshi Kato, senior trader at Mizuho Corporate Bank.

(Editing by Catherine Evans)

• A Permanent Economic Emergency