* FTSEurofirst 300 up 0.8 percent
* Burberry drops 7.1 pct after CEO leaves
* Cyclical miners, autos lead market higher
* European stock 'fear gauge' drops 7.7 pct
By Tricia Wright
LONDON, Oct 15 European shares rose on Tuesday,
with some benchmark indexes hitting multi-year highs, bolstered
by indications that a deal could soon be clinched in Washington
to avert a debt default.
The FTSEurofirst 300 was up 0.8 percent at 1,262.50
points by 1515 GMT, led by miners and autos as
investors bought into cyclical shares.
The blue-chip Euro STOXX 50 index added 0.8
percent to 3,001.94 points, hitting a fresh 2-1/2 year high,
while France's CAC 40 rose 0.7 percent to a 5-year high
and Germany's DAX was up 0.9 percent, at a record high.
Positive signals from talks on Monday between Democrat and
Republican Senate leaders fuelled hopes of an imminent deal to
reopen shuttered U.S. federal agencies and prevent a default on
Republicans also hope to pass their own version of
legislation to reopen the federal government, it emerged on
The Euro STOXX 50 Volatility index, or VSTOXX,
reversed Monday's gains, down 7.7 percent, signalling a sharp
rise in demand for risk.
"It's a risk-on day. The market's anticipating a resolution
to the gridlock in the U.S. and equities have responded
accordingly," Neil Veitch, investment director at SVM Asset
The better mood was also visible in the derivatives market,
with the Euro STOXX 50 put/call ratio falling back to 1.2, down
from a four-year high of 3.9 hit two weeks ago.
The ratio, a widely used European gauge of investor
sentiment, measures the trading volume of put options versus
call options on the Euro STOXX 50 .STOXX50E.
A ratio below 1 signals bullishness, while a ratio above 1.5
usually signals that investors are turning cautious, buying
'puts' as a hedge for their equity portfolios in case of a
"The sooner that we get to a resolution, depending on how
long-lasting that resolution is, then markets should quieten
down, but (there might not be) a big rally because we haven't
been seeing a significant amount of downside despite the
uncertainty," Henk Potts, market strategist at Barclays, said.
SVM's Veitch concurs, seeing little scope for stock markets
to gain much more in the event of a short-term fix, whilst
cautioning that the third-quarter earnings season is shaping up
to be an unlikely driver of the next leg higher in equities.
"(What is) likely is that we'll get another 'kick the can
down the road' type of exercise, in which case given markets
have been robust it's unlikely that we'll see a significant
move," SVM's Veitch said.
"There's not a lot there to propel the market higher. The
early indications that we've seen out of the earnings season...
have not been wholly encouraging."
Bucking the strong trend, UK luxury goods maker Burberry
Group dropped 7.1 percent to its lowest levels since
July following the departure of long-standing boss Angela
Ahrendts to Apple.
Swiss elevator manufacturer Schindler on Tuesday
became one of the latest European companies to issue a profit
warning, sending its shares down 5.6 percent.
Profit warnings have impacted stocks this month and analysts
have cut 2013 earnings estimates for the pan-European STOXX 600
index by 3 percent since the start of the third