EUROPEAN shares rose towards 2012 highs this morning, tracking overnight gains on Wall Street on signs of progress over a compromise to halt austerity measures that could damage the world's top economy's prospects.
By 0834 GMT, the FTSEurofirst 300 was up 4.71 points, or 0.4 percent at 1,137.2, nearing its peak for the year, as was France's CAC, which was up 0.3 percent at 3,650.20.
Germany's DAX hit its 2012 high, rising 0.5 percent to 7,643.82 as investors favoured a market characterised by defensive shares with exposure to emerging markets.
Across the Atlantic, the S&P 500 closed up 1.2 percent after President Barack Obama made a counter-offer to Republicans that included a change in position on tax hikes for the wealthy, according to a source.
"Overnight news on the fiscal cliff has been taken positively by the markets here in Europe after (they underperformed) ...the U.S. recently," Securequity sales trader Jawaid Afsar said.
He said that could drive further gains heading into the holiday period, which could take Britain's FTSE 100 to the long awaited 6,000 level area by the end of the year with miners and financials in demand.
European Banks rose 0.5 percent, tracking their U.S. peers.
Basic resources extended gains. Having underperformed broader markets by up to 25 percent in 2012, the sector has risen 10.8 percent in the last month on valuation grounds and reassuring economic data from China.
Flows into European equity funds climbed to a three-month high last week as U.S. investors beefed up their exposure to Europe, according to EFPR data.
The renewed demand for European shares has been driven by the data from China, a European Central Bank pledge made in September to do what it takes to save the euro, and optimism that a U.S. budget deal will be struck.
The market implied 5-year earnings per share compound annual growth rate for U.S. companies is 3.3 percent, compared with a 2.2 percent contraction for developed European corporates, according to Thomson Reuters Starmine data.