By Marc Jones
LONDON, Dec 4 (Reuters) - The euro hit a six-month high and
shares added to recent gains on Tuesday on optimism over
Greece's plan to buy back debt and encouraging news from Spain
The FTSEurofirst 300 index of top European shares
was up 0.3 percent at 1123.91 points ahead of an expected higher
start for Wall Street.
After a mixed open, London's FTSE 100, Frankfurt's
DAX and Paris's CAC-40 were all in positive
territory, helping the MSCI global share index
to add to a five percent rise over the last two weeks.
'Greece is on track with its debt buy back, Spain came out
and said it would take the 40 billion for its banks, and
Portugal will get its next round of funding,' said Heinz-Gerd
Sonnenschein, equities strategist at Postbank in Germany.
'Market participants were really encouraged by the Greek buy
back, so with it looking like Europe is on track, it is now over
to the U.S. (to find a fiscal cliff deal).'
The buyback is a crucial part of a deal reached last week by
Greece's international lenders to cut its debt pile and needs to
be completed before the IMF can release its share of the aid.
While markets have climbed on progress in the euro zone and
signs of faster growth big economies such as China, investors
remain wary of the U.S. 'fiscal cliff' - $600 billion of
impending tax hikes and spending cuts that could push the
world's largest economy into recession.
The White House dismissed a proposed deal from Republicans
on Monday saying it did not meet President Barack Obama's pledge
to raise taxes on the rich.
Investors' are expected to remain focused on budget
wrangling during U.S. trading.
In currency markets, the euro extended its recent
rally, hitting a fresh six-week high of $1.3091 against the
dollar and 1.2116 francs against the Swiss franc.
Adding to the optimism about Greece, Spain formally
requested 40 billion euros to bail out its banks at a late night
meeting of euro zone finance ministers.
'Overall the euro zone noises are coming out positive, and I
don't see any turning around there. The only real deal-breaker,
(which) will send the dollar spiking up and risk really off the
table, will be if there is a complete breakdown in the Congress
negotiations,' said Vishnu Varathan, regional economist in
Singapore for Mizuho Corporate Bank.
'Right now there is some disappointment here and there, but
overall still the consensus is that negotiations will result in
some kind of acceptable compromise.'
The European single currency's rise helped push the dollar
to a six week-month low against a basket of currencies, with its
index falling to 79.663.
The Australian dollar recovered from initial
weakness after a widely expected interest rate cut by the
Reserve Bank of Australia (RBA). The rate was trimmed by 25
basis points to 3.0 percent, matching the previous record low.
Commodities struggled, however, as weak manufacturing data
and the U.S. budget talks fanned concerns about the health of
the global economy and prospects for energy demand.
Oil and gold both lost ground, while copper was little
changed. Brent crude oil dipped to $110.60 a barrel, and
gold fell about 1 percent to its lowest in nearly a month
after prices broke below key support levels.
With the euro zone mood lifting, Spanish, Italian and Greek
bonds rose while German Bunds stayed on the back foot, though
losses were limited by the potential impasse in budget talks.
Italian 10-year yields fell 5 basis points to
4.40 percent, while the Spanish equivalent was 3 ticks down at
5.24 percent, extending Monday's falls after
Greece unveiled better-than-expected terms for the debt buyback.
(Additional reporting by Emelia Sithole-Matarise; Editing by
Will Waterman and Anna Willard)
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