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LONDON (AFP) – European shares edged upwards on Thursday before an EU summit aimed at creating a permanent financial rescue fund for debt-laden eurozone nations, dealers said.

London's FTSE 100 added 0.17 percent to 5,892.18 points, Frankfurt's DAX 30 index gained 0.15 percent to 7,026.94 points and the Paris CAC 40 advanced 0.19 percent to 3,887.72.

The European single currency rebounded briefly after Madrid conducted a successful bond auction, in a eurozone sovereign bond market heavily skewed by the readiness of the European Central Bank to buy up government debt, as an exceptional step to defend the eurozone.

But the Spanish IBEX 35 shares index dropped 0.21 percent to 9,989.50 points.

"The focus today is the EU summit, where markets are looking for a coherent and unified approach from policymakers to address the debt and banking crisis," said VTB Capital economist Neil MacKinnon.

European leaders will gather in Brussels to seek a permanent financial rescue fund to calm markets for good and turn the page on a roller-coaster year marked by Greek and Irish bailouts and fears for Spain.

"The EU summit which starts today could be the last significant market event of the year," added Rabobank analyst Jane Foley.

Heads of state and government are holding a two-day summit amid stubborn concerns that Portugal and even wealthier Spain could tumble into the debt crisis that has rocked the euro. The summit is scheduled to begin at 1600 GMT.

EU leaders now want to replace a 750-billion-euro (one-trillion-dollar) joint EU-IMF rescue mechanism, which was created in May and expires in 2013, with a permanent fund to shield the single currency for the long run.

The European Central Bank, which has bought billions of euros in government bonds to ease the eurozone debt crisis, has urged political leaders to beef up the European Financial Stability Facility (EFSF).

"There is likely to be support for permanent rescue mechanism to replace the EFSF," MacKinnon said.

Sentiment was hit on Wednesday after ratings agency Moody's announced it could cut Spain's credit rating again, one day after Standard & Poor's lowered its outlook for Belgium from stable to negative.

Spanish bond yields had soared close to a record high on Wednesday after the Moody's downgrade warning.

Markets were also on edge after Athens was rocked by fresh riots against the debt-laden government's austerity measures.

However, investors drew some comfort after the Irish parliament voted in favour of an 85-billion-euro bailout from the EU and the International Monetary Fund on Wednesday, seven months after a similar rescue of Greece.

In London, BP shares bucked the upwards trend, after overnight news that the United States has launched legal action against the embattled company over the devastating Gulf of Mexico oil spill disaster.

BP shares plunged almost two percent as investors responded to the latest news.

The US government filed suit on Wednesday for the first time against BP and eight other companies for uncounted billions of dollars in damages from the massive oil spill, which was the worst in US history.

BP's share price dropped 1.95 percent to 467.25 pence in morning London trade.

Asian stock markets traded mixed on Thursday as traders weighed upbeat US data against a potentially deepening eurozone crisis and the possibility of further steps by China to cool its economy.

Tokyo ended the session flat, Sydney closed up 0.34 percent, while Hong Kong fell 1.33 percent.

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