Europe Factors-Shares seen rebounding as Greece nears deal

LONDON, Jan 31 (Reuters) - European shares are expected to rebound on
Tuesday, taking cue from a late recovery from lows on Wall Street and helped by
hopes Greece is moving closer to avoiding a messy default that would have hefty
consequences on Europe's financial system.
U.S. indexes pared early losses in thin trade late on Monday, with money
managers happy to buy on intraday declines on hopes the recent rally, fuelled by
upbeat economic data and accommodative policies by central banks across the
globe, can be sustained.
Striking a confident note, Greek Prime Minister Lucas Papademos said
negotiators had made "significant progress" in talks to strike a restructuring
deal for Greek government debt, with the aim of having a definitive agreement by
the end of this week.
His comments came as European leaders agreed on Monday on a permanent euro
zone rescue fund and most endorsed a stricter budget discipline.
Of interest to the banking sector, some of the euro zone's biggest
lenders have told the Financial Times that they are preparing to tap the
European Central Bank's emergency funding scheme for up to twice as much as the
ECB supplied in its December auction.
"Reports that European banks are likely to park up trucks at the next ECB
LTRO in late February to pick up masses of cheap liquidity is likely to support
risk assets and again highlight that the ECB has done its bit to stave off a
systemic shock for the banks," Chris Weston, institutional dealer at IG Markets,
said.
Capping sentiment in Europe, however, were concerns that Portugal might need
a second rescue as Lisbon's borrowing costs soared in the face of record low
business and consumer confidence.
"It seems the market is pushing Portugal down the same path as Greece, and
bond holders are now coming to reality that they may have to write-off some of
their Portuguese debt holdings further down the line," IG's Weston added.
At 0726 GMT, futures for the Euro STOXX 50, Germany's DAX
and the French CAC 40 were up between 0.9 percent and 1.2 percent.
Financial spreadbetters earlier expected Britain's FTSE 100 to open as
much as 0.4 percent higher.
The FTSEurofirst 300 index of top European shares was on track to
record a second straight month of gains despite falling 1 percent to a two-week
closing low on Monday.
Investors will await January's Chicago PMI report, due at 1445 GMT, followed
by January U.S. consumer confidence data at 1500 GMT.

MARKET SNAPSHOT AT 0727 GMT
LAST PCT CHG NET CHG
S&P 500 1,313.01 -0.25 % -3.32
NIKKEI 8,802.51 0.11 % 9.46
MSCI ASIA EX-JP 1.09 % 5.44
EUR/USD 1.3182 0.36 % 0.0047
USD/JPY 76.28 -0.01 % -0.0100
10-YR US TSY YLD 1.858 -- 0.01
10-YR BUND YLD 1.816 -- 0.02
SPOT GOLD $1,740.19 0.67 % $11.55
US CRUDE $99.53 0.76 % 0.75

* Shares, euro recover on Greek debt hope, Portugal weighs
* Nikkei heads for best January performance since 1999
* Euro firms on Greek debt hopes; dollar at 3-mth low vs yen
* Wall Street ends off lows, suggesting resilience
* Brent rises above $111/bbl as supply trumps economy
* London copper gains on outlook for long-term demand
* Gold edges up; heads for biggest monthly gain since Aug
* U.S. bonds drop in Asia but supported by Portugal woes

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