European shares rise as U.S. debt deal awaited
* FTSEurofirst 300 up 0.2 pct, Euro STOXX 50 up 0.3 pct * U.S. Senate leaders 'very close' to fiscal deal -aide * Luxury sector beaten down after poor LVMH sales figures By Blaise Robinson PARIS, Oct 16 (Reuters) - European shares rose on Wednesday, with a blue-chip benchmark hitting a 2-1/2 year high, propelled by expectations of an imminent deal in Washington to avert a U.S. debt default. A senior Senate Democratic aide said on Wednesday that Senate negotiations on raising the debt limit and reopening government agencies were nearing an end and a deal could be announced soon. "There's a strong consensus that a deal is about to be reached," said Christian Jimenez, fund manager and president of Diamant Bleu Gestion, in Paris. "The 'great rotation' in asset allocation in favour of stocks is intact, although we need to see some improvement in the micro side. With all the negative surprises coming from companies recently, we're not there yet." At 1445 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,265.25 points, while the euro zone's blue-chip Euro STOXX 50 index was up 0.3 percent at 3,012.74 points, piercing 3,000 for the first time since May 2011. "Nobody really expects the U.S. to effectively shoot itself in the foot," said XBZ European equity options broker Mike Turner. "The Euro STOXX 50 is channeling recent highs and even if we do slip 50 points if there's no immediate deal, we'd only be easing out of what is still a bull phase." Equity markets worldwide have slipped back in October since the U.S. government was partly shut down due to the stalemate over the country's budget. This in turn has led to concerns over the $16.7 trillion debt ceiling, which Treasury Secretary Jack Lew said the government would hit no later than Oct. 17. Germany's DAX index was up 0.5 percent, hitting a record high at 8,846.41 points but France's CAC 40 bucked the trend, down 0.3 percent, dragged lower by a 5 percent drop in one of its biggest blue chips, LVMH. The owner of bag maker Louis Vuitton posted a surprise slowdown in sales growth, knocking shares in the sector. Hermes fell 1.1 percent, Gucci owner Kering lost 1.2 percent, and Burberry slipped 0.4 percent. Shares in struggling French car maker PSA Peugeot Citroen tumbled 8 percent, extending its losses this week to 20 percent. The stock has been knocked lower by mounting fears the company, which burns nearly 170 million euros ($230 million) a month including restructuring costs, will need a massive capital increase. Peugeot's latest slump has attracted fresh interest from hedge fund short-sellers, with the level of Peugeot shares out on loan rising to 8.8 percent this week. Odey Asset Management LLP, D.E. Shaw, Marshall Wace LLP and Adage Capital Management are among the hedge funds with the biggest short positions on the stock.
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