GLOBAL MARKETS-U.S. debt deal hopes lift shares, dollar steadies
* European, Asian stocks track Wall Street higher, yen broadly lower
* All eyes on Washington as progress seen over deadlock
* Gold, copper steady after weekly falls, oil holds gains
LONDON, Oct 11 (Reuters) - Firming hopes of U.S. deal to ensure the country does not default on its debt lifted world shares for a second day on Friday and put the dollar on course for its first weekly rise in five. Republican lawmakers on Thursday offered a plan that would extend the U.S. government's borrowing authority for several weeks, staving off a default that could otherwise come as soon as Oct. 17. While no deal emerged from a meeting with the Democrats at the White House, the two sides appeared ready to end a political crisis that has shuttered much of the U.S. government for over a week and dented Washington's image worldwide. Asian markets rallied overnight following on from Wall Street's strongest session since January , and European shares were quick to follow suit as they added 0.3 percent in early trading to Thursday's 1.7 percent jump. The dollar was holding its ground, heading for its first weekly rise since early September, and German government bonds tracked gains by U.S. Treasuries. as debt markets continued to show relief. One U.S. politician said a deal could be struck as early as Friday and Nick Beecroft, chairman of Saxo Capital Markets, said he expected a short-term agreement which would give the U.S. around 6 weeks of breathing space by Tuesday at the latest. "I think when we see an agreement on the debt ceiling we will see the high in U.S. Treasury yields drift down due to relief out of that and the stock market will probably do well," Beecroft said, adding there were other implications for financial markets too. "I think it lends even more support to what I am beginning to feel, which is that tapering is not going to happen until March. When the data eventually comes through, it will look so subdued that there will be no way the Fed's hurdles (to start stimulus withdrawal) would have been met by December."
YEN EASES Just round the corner from the wrangling in the White House, top officials and central bankers from the world's largest economies were meeting at the IMF and World Bank's annual meetings. U.S. Treasury Secretary Jack Lew and Federal Reserve Chairman Ben Bernanke assured their G20 counterparts at a dinner on Thursday that a resolution would be reached in time. In currency markets, the 'risk-on' mood was clear with traditional safe refuge, the yen, sagging across the board, particularly against higher-yielding currencies such as the Australian dollar. The dollar and euro each rose to 1-1/2 week highs against the Japanese currency and were last at 98.30 yen and 133.23 respectively. The euro was steady at $1.3535, holding the dollar index, which tracks the greenback's performance against a basket of major currencies, steady at 80.345 and just under a 80.595 two-week high set on Thursday. Commodity markets remained choppy. With the dollar steadier after two days of gains, oil's rebound came to a halt at $111.48 a barrel. Gold firmed at $1,290, though it looked set for its second week of 1.5 percent-plus falls. Struggling also was copper, one of the metals most attuned to global growth. It put on 0.1 percent to $7,153.00 a tonne, but the week's stresses left it heading for its biggest weekly drop in a month. Traders and economists warned that the U.S. fiscal crisis remained delicate and any setback in resolving it could see markets quickly turn tail. "The situation is fluid, but it seems like progress is being made on averting the worst-case scenario. But a short-term solution should be met with short-term enthusiasm," analysts at Nomura wrote in a client note.