European shares hit highs on U.S. budget deal optimism

LONDON Tue Oct 15, 2013 3:22am EDT

LONDON Oct 15 (Reuters) - A major European stock index hit a 2-1/2-year high and Germany's DAX a record peak on Tuesday on growing optimism that U.S. lawmakers would soon agree a deal to re-open the government and avoid a possible default.

The Euro STOXX 50 rose 0.4 percent to its highest since mid-2011 and the DAX gained 0.5 percent to a new high after U.S. Senate Majority Leader Harry Reid, a Democrat, and his Republican counterpart, Mitch McConnell, ended a day of talks on Monday, with Reid saying they had made "tremendous progress".

"Optimism that a deal will soon be agreed continues to prevail. Relief that politicians have taken the U.S. to the edge and back again is clear," said Keith Bowman, equity analyst at Hargreaves Lansdown.

"The move allows investors to again concentrate on fundamentals, including the now unfolding third-quarter results season."

The plan under discussion would end a partial government shutdown and raise the debt ceiling by enough to cover the country's borrowing needs at least through mid-February 2014, according to a source familiar with the talks.

The FTSEurofirst 300 index of top European shares rose 0.7 percent to 1,259.35 points after setting a two-week high. The index is up more than 10 percent this year.

However, Schindler, the top decliner, fell 5.3 percent, after saying net profit fell to 368 million Swiss francs ($405.62 million) during the first nine months of the year.

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