European shares up on U.S. fiscal deal expectations

LONDON Thu Nov 29, 2012 8:09am GMT

LONDON Nov 29 (Reuters) - European stocks rose early on Thursday, echoing gains overnight in the United States as law makers there boosted confidence that a deal on fiscal policy would be struck, with basic resources the top sectoral gainer.

By 0801 GMT, the FTSEurofirst300 was up 3.8 points, or 0.4 percent, at 1,113.14. The STOXX Europe 600 Basic Resources index, meanwhile, was up 1.2 percent.

Appetite for equities grew after U.S. President Barack Obama and U.S. House of Representatives Speaker John Boehner signaled intent that the Republicans and the White House could soon strike a deal to avoid a $600 billion 'fiscal cliff' of austerity measures.

Rising expectations for a deal have helped European shares bounce off the near four-month lows struck in the middle of November and recover 4 percent in the last seven trading days.

"The default assumption appears to be that a deal will be reached before the year-end deadline," Ian Williams, equity strategist at Peel Hunt, said.

Williams, however, cautioned that there could still be many bumps in the road before an agreement is reached, laying the foundations for a potentially choppy final month of the year.

"Investors would be well advised to treat the smoke signals from the ongoing fiscal negotiations in Washington with a degree of caution; they are only increasing the volatility in markets, which are already vulnerable to low-volume moves," he said.

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