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Europe Shares Close Up on US Fiscal Deal Hopes

European stock indexes posted their biggest gains in 10 weeks on Monday, on signs of progress in U.S. negotiations to avert the looming $600 billion "fiscal cliff" of tax hikes and spending cuts.

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The pan-European FTSEurofirst 300 closed provisionally up 2.3 percent at 1,091.49 points, building on a rally sparked by signs of progress in U.S. fiscal cliff discussions on Friday and over the weekend. The FTSEurofirst 300 opened 0.5 percent higher on Monday morning, having closed at a three and a half month-low on Friday.

All sector indices on the pan-European STOXX 600 index closed in positive territory, led by shares that depend on economic growth, such as auto stocks and banks.

Among bank stocks, Germany's Commerzbank, France's Credit Agricole and Britain's Barclays all closed more than 5 percent higher.

Fiscal Cliff Deal Looming?

On Friday, leaders of the U.S. Senate and House said they would be flexible in efforts to settle policy differences to avoid the fiscal cliff, which could send the world's largest economy into recession if no agreement is reached.

U.S. President Barack Obama expressed optimism on Sunday that a deal can be reached on the fiscal cliff. "I am confident we can get our fiscal situation dealt with," Obama said in Bangkok, at the start of a three-nation Southeast Asia trip, including the first visit to Myanmar (Burma) by a U.S. president.

"That [progress in negotiations] was the catalyst for the short-term gain of the market," said Vincent Guenzi, chief strategist at Cholet Dupont.

"That could help the market maybe gain 1 or 2 percent more, but to really have the end of the downtrend of the last weeks, we need something real."

An unexpected rise in U.S. existing home sales for October added to the brighter sentiment towards the world's biggest economy on Monday, which has become a significant source of growth for European companies as their domestic region flirts with recession.

On the other side of the Atlantic, Thomson Reuters reported that euro zone finance ministers will give a tentative go-ahead for the disbursement of 44 billion euros in emergency loans to Greece on Tuesday. However, the money will only be paid on December 5 if the country meets all remaining aid conditions.