GLOBAL MARKETS-Euro, shares gain on Greek deal hopes, German data

Fri Nov 23, 2012 8:39am EST

* Euro hits 3-week high on optimism for a Greek deal

* European shares steady, on course for 3.5 pct weekly gain

* World shares headed for their best week since mid-Sept

* Oil dips towards $110/brl as Israel-Gaza ceasefire holds

By Richard Hubbard

LONDON, Nov 23 (Reuters) - The euro hit a three-week high on Friday on signs of progress in negotiations to get fresh aid cash to Greece and after an influential German survey found business sentiment had improved.

The euro climbed 0.2 percent to $1.2906, on course for its second week of gains against the dollar.

Equity markets saw a more muted reaction, with the pan-European FTSEurofirst 300 index steady at around 1,105 points, but on track for its best week in about 10 months.

U.S. stock index futures pointed to modest gains when Wall Street opens for a short post-Thanksgiving trading day, with the retail sector in focus as the holiday shopping season begins.

Optimism on a deal to help Greece, hopes that United States lawmakers can agree steps to avoid a fiscal crisis, and data showing an improving global economic outlook have fuelled a rally across riskier asset markets this week.

MSCI's world equity index was up 0.15 percent on Friday at 326.75 points, for a gain of nearly 3 percent since Monday. That will be its best weekly performance since mid-September.

Earlier, MSCI's broadest index of Asia Pacific shares outside Japan rose 0.7 percent for a weekly gain of 2.6 percent, also its best week for two months.

With the end of the year approaching, analysts say the gain could continue.

"From a seasonal perspective, December and January have been quite decent months in the past, so I would not be too surprised if we see a good development in equities over the next couple of weeks," said Gerhard Schwarz, head of equity strategy at Baader Bank.

Europe's FTSEurofirst 300 index has risen in December for 12 of the last 15 years.

EUROPEAN HOPES

The economic optimism got a small boost from the latest survey of German companies by the Munich-based Ifo think-tank, which found firms were becoming more upbeat about the outlook despite the euro zone crisis.

"Export expectations rose strongly and are back in the positive area now. The orders situation and demand are stabilising. Exports to the United States and Asia seem to be going well," Ifo economist Klaus Wohlrabe said.

The survey followed data on purchasing manager's intentions around the world this week, which signalled improving activity in China and the United States, while finding conditions in Europe had broadly stabilised at weak levels.

The hopes that Greece will get the money it needs to avoid bankruptcy were linked to reports the International Monetary Fund and the European Union had narrowed their differences over the target for Greek debt reduction by 2020.

Agreement on a new debt target and how it can be reached is a key stumbling bock in agreeing the release of 44 billion euros ($57 billion) of funds from the Greek bailout package.

"It's not the first time we have this type of news," said ING rate strategist Alessandro Giansanti. "Until there is an official statement, detailing what they want to do, especially in terms of a debt restructuring, we're not going to see so much of a reaction."

Euro zone finance ministers, the IMF and the European Central Bank are due to meet again on Monday to agree the deal.

Ten-year German government bonds, a barometer of investor sentiment on the euro zone crisis were 2 basis points lower at 1.42 percent.

Greek government bond yields, however, were 5 basis points higher at 16.49 percent - a relatively small move for the volatile paper, which remains close to its lowest level since the country's debt was restructured in March.

COMMODITIES MIXED

The positive German data and hopes for a Greek deal lifted gold 0.3 percent to $1,733.34 an ounce. After gains of around 1 percent this week, the precious metal is set to post its best weekly rise in nearly two months.

Brent crude futures were down 22 cents at $110.33 a barrel and U.S. crude was down 27 cents against Wednesday's settlement to $87.11, as the fragile ceasefire between Israel and Gaza held, easing supply concerns.

On Thursday Israel began withdrawing its army, which had been poised to invade the Gaza Strip in pursuit of militants firing rockets into Israel.

"Oil prices will probably be under pressure as long as the ceasefire holds," said Filip Petersson, a commodity strategist at SEB Commodity Research.