Euro, global shares gain as Greek deal seen closer

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By Richard Hubbard | November 23, 2012 10:21 PM EST

The euro hit a three-week high on Friday after an unexpected rise in German business sentiment for November and on signs of progress in efforts to help Greece secure fresh funding.

Companies in Europe's powerhouse economy have turned slightly more optimistic about the outlook despite the euro zone crisis, breaking a six-month run of worsening sentiment, the Munich-based Ifo think-tank said.

"The unexpected rise in November's German Ifo survey provides some relief, but doesn't alter the big picture of near stagnation in the euro zone's growth engine," said Jonathan Loynes, chief European economist at Capital Economics.

The euro climbed to $1.2913 following the data and is on track to gain 1.2 percent against the dollar this week.

European equity markets showed less reaction as many investors chose to end one of the best weeks of 2012 so far by booking some of their profits.

The pan-European FTSEurofirst 300 index <.FTEU3> edged up 0.1 percent at 1,102.35 points, on course for its best week since May and the second biggest weekly gain of the year.

London's FTSE 100 <.FTSE>, Paris's CAC-40 <.FCHI> and Frankfurt's DAX <.GDAXI> were between flat and 0.2 percent higher. <.EU> <.L>

GREEK OPTIMISM

The gains across European markets were supported by optimism that Greece will get the money needed to avoid bankruptcy when euro zone finance ministers, the International Monetary Fund and the European Central Bank meet again on Monday.

A Greek government official told Reuters the IMF and the European Union have narrowed their differences over the target for Greek debt reduction by 2020.

Agreement on a new debt target and how it can be reached is a key stumbling bock in agreeing the release of 44 billion euros ($57 billion) of funds from the bailout package Greece desperately needs to avoid bankruptcy.

"The market is getting a bit confident that a Greek deal will be struck. This will remove one of the near-term uncertainties in the euro zone," said Paul Robson, currency strategist at RBS.

Greek government bond yields, however, were 5 basis points higher at 16.49 percent, but a relatively small move for the volatile paper and still close to its lowest level since the country's debt was restructured in March.

"It's not the first time we have this type of news. The market knows there is a disagreement," said ING rate strategist Alessandro Giansanti. "Until there is an official statement, detailing what they want to do, especially in terms of a debt restructuring, we're not going to see so much of a reaction."

Ten-year German government bonds, a barometer of investor sentiment on the euro zone crisis were 2 basis points lower at 1.42 percent.

YEAR END OUTLOOK

The potential for a Greek deal and signs lawmakers in the United States will eventually agree steps to avoid a fiscal crisis there have been behind a strong rally in share markets around the world this week and have supported commodities.

"These two positive drivers should make for a strong month of December, which traditionally is a fairly good month anyway," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

MSCI's world equity index <.MIWD00000PUS> was up 0.15 percent on Friday at 326.75 points, on course for a gain of nearly 3 percent this week. That will be its best weekly performance since mid-September.

U.S. stock index futures also point to modest gains when Wall Street trading resumes for a short post-Thanksgiving trading day. <.L><.EU> <.N>

Earlier, MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> rose 0.7 percent for a weekly gain of 2.6 percent, its best week for two months.

Gold edged up 0.1 percent to $1,731.36 an ounce and looks set to post its second weekly rise in three, while three-month copper on the London Metal Exchange was up 0.18 percent a tonne at $7,729.

On the other hand Brent crude slipped towards $110 a barrel as the fragile ceasefire between Israel and Gaza eased supply concerns.

On Thursday Israel began withdrawing its army, which had been poised to invade the Gaza Strip in pursuit of militants firing rockets into Israel.

"Oil prices will probably be under pressure as long as the ceasefire holds," said Filip Petersson, a commodity strategist at SEB Commodity Research.

($1 = 0.7761 euros)

(Additional reporting by Anirban Nag, Claire Milhench and Kirsten Donovan; Editing by Will Waterman)

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