European shares, euro higher as risk appetite grows

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By Marc Jones | October 16, 2012 6:42 PM EST

European shares and the euro led a fresh push by risk assets on Tuesday, with investors buoyed by the latest batch of U.S. data and earnings and hopeful a meeting of European leaders later in the week can advance plans to tackle Spain and Greece's debts.

There is plenty more data coming in both Europe and the United States on Tuesday: the ZEW survey will give a reading on German business confidence; euro zone September inflation is expected to be confirmed at 2.7 percent; and Italian trade and British consumer and retail price data will also be released.

European shares on the FTSE Eurofirst 300 index <.FTEU3> rose 0.5 percent to 1104 as trading resumed across the region, with London's FTSE 100 <.FTSE>, Paris's CAC-40 <.FCHI> and Frankfurt's DAX <.GDAXI> all in positive territory.

The euro, which has risen almost 1 percent so far this week, climbed to $1.2994 against a marginally weaker dollar, albeit one which it hit a one-month high versus the yen, supported by Softbank's bid for Sprint.

"The upcoming European session is set to be heavily influenced by a raft of UK inflation measures, European trade balance data, the German ZEW economic sentiment index, as well as earnings reports from the likes of Goldman Sachs, IBM and Intel," said Cameron Peacock, market strategist at IG Markets.

Demand for German government bonds - viewed as a safe haven asset - dipped, with Bund futures opening slightly lower while Italian and Spanish 10-year bonds were stable.

Ahead of a European summit on Thursday, investors are looking for signals that may affect expectations that Spain will ask for a bailout in the coming weeks - a move which would activate the European Central Bank's bond buying scheme - and that Greece will be given support to allow it stay in the euro.

Economists polled by Reuters see the ZEW sentiment index improving to -15.0 when it is released at 1000 GMT, versus -18.2 last month.

"In terms of market-moving data, the ZEW indicators will be the most interesting," said ABN Amro economist Nick Kounis.

"We think systemic risks have fallen, so these sort of factors should show that better times are ahead in the next six months or so."

(Reporting by Marc Jones; Editing by Alastair Macdonald)

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