Europe Factors to Watch-Shares to spike on EU bank supervision deal

(Adds detail, quotes, company news; updates snapshot table)

By Atul Prakash

LONDON, June 29 (Reuters) - European shares are set to surge on Friday, with
appetite for riskier assets rising after leaders agreed on a supervisory body
for euro zone banks and a plan to allow them to be recapitalised directly by the
rescue fund without adding to government debt.

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

"The agreement on direct bank recapitalisation is an important step in the
right direction. It breaks the vicious spiral between insolvent banks and their
government," Koen De Leus, strategist at KBC Securities, in Brussels, said.

"The deal is not a game changer, but definitely a sentiment changer."

The leaders at a summit also agreed that euro area rescue funds could be
used to stabilise bond markets without forcing countries that comply with EU
budget rules to adopt extra austerity measures or economic reforms.

Futures for Euro STOXX 50, Germany's DAX and France's CAC
were up 2.4-2.8 percent, while U.S. stock futures
rose 1.1 to 1.4 percent. Financial spreadbetters earlier predicted Britain's
FTSE to open as much as 1.7 percent higher.

Spanish and Italian share index are expected to see a
strong rally as the agreement could result in a reduction in their spiralling
borrowing costs.

Banking shares will also be in focus after falling 2.4 percent in
the previous session, dragged down by a 15.5 percent slump in Barclays
following investigations that found it tried to manipulate key market interest
rates. Britain will expose on Friday a second scandal involving the country's
banks in as many days - that it has found evidence that banks mis-sold products
to protect small businesses against a rise in interest rates.

The banking index has fallen nearly 15 percent so far this quarter, while
the FTSEurofirst 300 index of top European shares has dropped about 7
percent during the same period.

MARKET SNAPSHOT AT 0633 GMT

LAST PCT CHG NET CHG

S&P 500 1,329.04 -0.21 % -2.81

NIKKEI 9,006.78 1.5 % 132.67

MSCI ASIA EX-JP 2.25 % 10.52

EUR/USD 1.2589 1.21 % 0.0150

USD/JPY 79.40 -0.01 % -0.0100

10-YR US TSY YLD 1.621 -- 0.04

10-YR BUND YLD 1.626 -- 0.12

SPOT GOLD $1,567.09 1.05 % $16.34

US CRUDE $79.61 2.47 % 1.92

* Stocks, euro surge on EU bond support

* Japan's Nikkei jumps after EU bank deal

* Wall St pares losses late, ends modestly lower

* Oil gains $1 on EU hopes; set for worst qtr since 2008

* Gold eyes longest monthly losing streak since 1997

* Euro, Aussie wilt on little progress at EU summit

* LME copper up on dlr; set for weakest quarter since 2011

COMPANY NEWS:

CREDIT SUISSE

Credit Suisse wants to tweak the terms of 6 billion Swiss francs ($6.2
billion) in hybrid bonds after two major shareholders signalled their
willingness to buy the instruments ahead of schedule, according to a newspaper
report.

NESTLE

Nestle said it has agreed to sell its Peters Ice Cream business,
home to top-selling brands including Drumstick, Heaven and Frosty Fruits, to
Australian private equity firm Pacific Equity Partners for an undisclosed sum.

EADS

Europe's Airbus is expected to announce on Monday its new plan to open an
assembly line in the United States, according to French media reports. This
would mark a direct challenge to Boeing in its home market as competition heats
up in the global jet market.

FRESENIUS, RHOEN-KLINIKUM

German group Fresenius looks likely to fail in its 3.1 billion
euro ($3.9 billion) bid to take over hospital operator Rhoen-Klinikum,
sources close to the transaction said on Thursday.

RWE

RWE has asked a German court to rule the country's EUA auctions between 2008
and 2012 illegal, a move that could force the nation's carbon registry to hand
German firms around 200 million carbon allowances, a lawyer representing RWE
said Thursday.

DEUTSCHE BANK

Deutsche Bank co-chief executive Juergen Fitschen said Basel III capital
rules needed to be implemented with caution or risk more disruptions to the
economy such as Commerzbank's shock withdrawal from shipping finance.

VIVENDI

The reign of Chief Executive Jean-Bernard Levy ended in a strategy dispute
with the French telecoms and media conglomerate's supervisory board, paving the
way for possible disposals to shake up its flagging share price.

(Reporting by Atul Prakash)