At 1000 GMT, the FTSEurofirst 300 index of top European shares was up 0.7 percent at 1,261.65 points. The euro zone’s blue-chip Euro STOXX 50 index added 0.6 percent to 2,996.43 points, hitting a fresh 2-1/2 year high, while France’s CAC 40 rose 0.7 percent to a 5-year high and Germany’s DAX was up 0.8 percent, at a record high. “Every time we see a pull-back, a powerful wave of buyers comes back. Investors who have had pockets of cash, waiting for the rally, are now forced to buy,” Aurel BGC chartist Gerard Sagnier said. Positive signals from talks on Monday between Democrat and Republican Senate leaders fuelled hopes of an imminent deal to reopen shuttered U.S. federal agencies and prevent a default on federal debt, sending world stocks higher. The plan under discussion would end a partial government shutdown and raise the debt ceiling by enough to cover the nation’s borrowing needs at least until mid-February 2014. Also brightening the mood, data showed on Tuesday that German analyst and investor sentiment improved unexpectedly in October on signs that the euro zone economy is over the worst of its downturn. The better mood was also visible in the derivatives market, with the Euro STOXX 50 put/call ratio falling back to 1.2, down from a 4-year high of 3.9 hit two weeks ago. The ratio, which is one of Europe’s widely-used gauges of investor sentiment, measures the trading volume of put options versus call options on the Euro STOXX 50. A ratio below 1 signals bullishness, while a ratio above 1.5 usually signals that investors are turning cautious, buying ‘puts’ as a hedge for their equity portfolios in case of a correction. “The consensus is bullish, everyone believes that a deal will be reached (in Washington), so it could already be priced in,” said Guillaume Dumans, co-head of research firm 2Bremans. “Deal or no deal, the size of the U.S.

The pan-European FTSEurofirst 300 Index closed provisionally higher by 0.9 percent on Tuesday. The U.K.’s FTSE 100 closed higher by 0.7 percent, the French CAC 40 closed higher by 0.8 percent and the German DAX closed up 1 percent. House Speaker John Boehner said the Republicans were still involved with talks with House Democrats, but no deal has emerged so far on Tuesday. Earlier, House Republican leaders proposed a plan that would fund the government past year-end and allow the Treasury Department to borrow normally until February 7. However, Senate Majority Leader Harry Reid criticized the proposal , saying it would not pass through Senate. The debate came with the partial government shutdown now in its third week, and less than two days before the Treasury says it will be unable to continue borrowing. IBEX 35 — Back in Europe, German Chancellor Angela Merkel’s conservative alliance said it was likely to hold a third round of talks with the Social Democratic Party later this week, with regards to forming a coalition government . Meanwhile, German economic sentiment rose more than expected in October, on signs the euro zone crisis may be waning, a survey by the ZEW economic think tank showed. Its poll rose to 52.8 in October from 49.6 in September, the highest level since April 2010. “Today’s ZEW index gives the impression that analysts believe in the invulnerability of the German economy…The new dark clouds coming from the other side of the Atlantic have not yet blacked out analysts’ optimism,” said Carsten Brzeski, senior economist at ING. In the U.K., inflation remained at 2.7 percent in September, according to the Office for National Statistics, going against economists’ forecasts which had indicated a slight tick down to 2.6 percent. In stock news, Burberry Group was the sharpest faller on the FTSE, after it announced that Chief Creative Officer Christopher Bailey would replace long-standing Chief Executive Angela Ahrendts, who is heading to Apple .