European shares rise as U.S. debt deal awaited

Wed Oct 16, 2013 10:58am EDT

* 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.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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