* European shares hit 18-month high; German confidence jumps * Wall Street rises 1 pct as fiscal talks quicken * Fed expected to announce new Treasury securities purchases * Oil prices tick up on Egypt, Syria tensions By Wanfeng Zhou NEW YORK, Dec 11 (Reuters) - Global shares rose to an almost two-month high and the euro gained versus the dollar on Tuesday after German investor sentiment improved sharply in December and as the pace of talks in Washington to avoid the "fiscal cliff" quickened. The dollar weakened as investors steered clear of the U.S. currency ahead of a two-day Federal Reserve policy meeting that will start later in the day. U.S. Treasury prices fell as gains in stocks eroded safe-haven demand for government debt. Major U.S. stock indexes rallied 1 percent, pushing the S&P 500 to its best levels since mid-October and erasing all of the post-election selloff. Morale among German analysts and investors improved sharply in December, according to a monthly poll by the ZEW think-tank. Sentiment jumped to a reading of 6.9 against expectations of -12.0, fanning hopes that Germany, Europe's largest economy, will avoid recession this winter. Traders voiced cautious optimism as U.S. politicians held more talks over the "fiscal cliff" of steep tax increases and spending cuts set for the end of the year. Representatives from both sides cautioned that an agreement remains uncertain. "I guess in our own dysfunctional way, there is progress," said Frank Davis, director of sales and trading at LEK Securities in New York. "Since conversations are occurring it clarifies at least they are taking some action. My personal gut is they'll jostle this into the holiday week and try to do a last-minute push." The lack of demonstrable progress has kept investors from making aggressive bets in recent weeks. But stocks have steadily marched higher on thin volume. The S&P 500 surpassed 1,433.38 on Tuesday, retracing the losses of the first seven sessions after President Barack Obama's re-election. The Dow Jones industrial average gained 118.42 points, or 0.90 percent, to 13,288.30. The Standard & Poor's 500 Index gained 13.89 points, or 0.98 percent, to 1,432.44. The Nasdaq Composite Index gained 42.02 points, or 1.41 percent, to 3,028.99. The Nasdaq was lifted by a 3 percent rise in Apple Inc shares, following a slump in the shares last week as investors took profits ahead of a possible rise in capital gains taxes. The FTSEurofirst 300 index closed up 0.4 percent at 1,138.85 points, its highest finish since mid-2011. The MSCI global stock index hit its highest level since Oct. 19 and was last up 0.7 percent at 337.48 points. The U.S. central bank is expected to announce a new round of Treasury securities purchases at the end of its two-day meeting on Wednesday, according to a Reuters poll. The program would replace its "Operation Twist" stimulus, which expires at the end of the year. Many economists believe the Fed will announce monthly bond purchases of $45 billion, although some think it could be more. "We anticipate the Fed will announce Treasury purchases, and as that depresses yields, it will have a negative impact on the dollar and that supports the euro," said Jane Foley, senior currency strategist at Rabobank. Expectations of more easing drove the dollar index down 0.3 percent and pushed the Canadian dollar to a two-month high, while the New Zealand dollar hit a nine-month high of $0.8369. The euro rose 0.4 percent to $1.2993, while against the yen the dollar was up 0.1 percent at 82.39 yen. Markets had been rattled on Monday by Italian Prime Minister Mario Monti's announcement he would step down some weeks early. But the upbeat ZEW data helped lift shares and the euro from their gloom. Benchmark 10-year Treasury notes were trading 11/32 lower in price to yield 1.6541 percent, the highest in over a week and up from 1.63 percent late Monday. Investors were also pushing for price concessions heading into $66 billion of U.S. government debt auctions this week. In the oil market, Brent crude rose 41 cents to $107.74 a barrel after OPEC said its production declined in November, while the weaker dollar and Middle East unrest also supported prices. U.S. crude gained 10 cents to $85.66. Gold was steady near $1,708 an ounce, with more U.S. stimulus expected to support gold's appeal as a hedge against inflation.