EUROPE'S main stock markets have climbed as investors welcomed signs of progress in talks on a new deficit-cutting budget to avoid the so-called fiscal cliff in the United States, dealers say.
In late morning deals on Tuesday, London's benchmark FTSE 100 index of leading shares rose 0.40 per cent to 5,935.72 points, Frankfurt's DAX 30 index won 0.53 per cent to 7,644.98 points and the Paris CAC 40 climbed 0.10 per cent to 3,641.91.
Milan's FTSE Mib index added 0.44 per cent to 16,075.25 points, ahead of a key budget vote by the Italian parliament, while Madrid's IBEX 35 gained 0.95 per cent to 8,117.2 points.
"Stocks are gaining altitude this morning as investors, confident that the fiscal cliff drama will be solved this side of Christmas, resume buying," said Mike McCudden, head of derivatives at online brokerage Interactive Investor.
"Talk of President (Barack) Obama changing his stance over tax hikes for the wealthy is being heralded as the breaking of one of the final barriers to a resolution."
The European single currency firmed to $US1.3181, up from $US1.3161 late in New York on Monday. Gold prices advanced to $US1,701.25 an ounce on the London Bullion Market, from $US1,695.75.
In company news, Rolls-Royce shares rallied 0.93 per cent to 867.50 pence in London after it confirmed a $US1 billion ($A952.06 million) contract with Japan's Skymark Airlines for Trent 900 engines to power six Airbus A380 aircraft.
Asian equities mostly rose on Tuesday, taking a lead from Wall Street as dealers grow confident US lawmakers will reach an agreement.
Politicians are seeking to break the deadlock and avert automatic taxation hikes and spending cuts that are due to come into effect on January 1 in the United States.
Experts fear that the fiscal cliff package could tip the world's biggest economy back into recession.
"Giving markets a boost is a late rally in US stocks yesterday evening carrying over to European markets this morning as President Obama indicated that he would be willing to raise the income threshold by which tax increases would come into effect," said ETX Capital trader Markus Huber.
"As expected - with the end of the year approaching fast (and) a rather empty economic data schedule ... focus will mostly be on US budget negotiations with the smallest hint of progress or setback can have a substantial impact on the markets," he said.
Any indication that there is some movement in the budget negotiations and that the two parties are making an effort to find a solution "is enough to keep markets moving higher", added Huber.
President Obama hosted top Republican lawmaker John Boehner in the White House for 45 minutes on Monday in the latest effort to avert going over the fiscal cliff.
The meeting follows news that Boehner had changed his position on not allowing any more taxes, saying at the weekend that he would agree to some hikes for people earning more than $US1 million.
Originally Obama insisted higher taxes kick in for households earning more than $US250,000, but has since offered to increase the threshold to $400,000.
Analysts say the development shows the outline of a tentative deal is being formed.
Continued weakness of the yen helped send Japanese shares surging for a second straight session as Shinzo Abe prepares to take over as prime minister, vowing to press a more aggressive policy of monetary easing.
Tokyo rose 0.96 per cent and Seoul was up 0.51 per cent, while Sydney added 0.48 per cent.
Shanghai increased by 0.10 per cent, while Hong Kong gave up earlier gains to end flat.
The election of Abe and his Liberal Democratic Party on Sunday was widely expected and investors now expect the Bank of Japan to unveil a further loosening of monetary policy at the end of its two-day meeting on Thursday.
In Tokyo share trading, utility giant TEPCO, which runs the Fukushima plant at the centre of last year's nuclear crisis, surged 17.32 per cent on expectations the new government will shelve any short-term plans to ditch atomic power.
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