CORRECTED-GLOBAL MARKETS-Euro hits 6-week high, shares up on euro zone progress

(Corrects euro high in first paragraph to six-week from

six-month)

* European shares near year highs after falls in Asia, U.S.

* Euro returns to 6-week high on Greece optimism

* "Fiscal cliff" uncertainty weighs on commodities

* Wall Street expected to open firmer

LONDON, Dec 4 (Reuters) - The euro hit a six- week high and

shares added to recent gains on Tuesday on optimism over

Greece's plan to buy back debt and encouraging news from Spain

and Portugal.

The FTSEurofirst 300 index of top European shares

was up 0.3 percent at 1123.91 points ahead of an expected higher

start for Wall Street.

After a mixed open, London's FTSE 100, Frankfurt's

DAX and Paris's CAC-40 were all in positive

territory, helping the MSCI global share index

to add to a five percent rise over the last two weeks.

"Greece is on track with its debt buy back, Spain came out

and said it would take the 40 billion for its banks, and

Portugal will get its next round of funding," said Heinz-Gerd

Sonnenschein, equities strategist at Postbank in Germany.

"Market participants were really encouraged by the Greek buy

back, so with it looking like Europe is on track, it is now over

to the U.S. (to find a fiscal cliff deal)."

The buyback is a crucial part of a deal reached last week by

Greece's international lenders to cut its debt pile and needs to

be completed before the IMF can release its share of the aid.

While markets have climbed on progress in the euro zone and

signs of faster growth big economies such as China, investors

remain wary of the U.S. "fiscal cliff" - $600 billion of

impending tax hikes and spending cuts that could push the

world's largest economy into recession.

The White House dismissed a proposed deal from Republicans

on Monday saying it did not meet President Barack Obama's pledge

to raise taxes on the rich.

Investors' are expected to remain focused on budget

wrangling during U.S. trading.

EURO HIGH

In currency markets, the euro extended its recent

rally, hitting a fresh six-week high of $1.3091 against the

dollar and 1.2116 francs against the Swiss franc.

Adding to the optimism about Greece, Spain formally

requested 40 billion euros to bail out its banks at a late night

meeting of euro zone finance ministers.

"Overall the euro zone noises are coming out positive, and I

don't see any turning around there. The only real deal-breaker,

(which) will send the dollar spiking up and risk really off the

table, will be if there is a complete breakdown in the Congress

negotiations," said Vishnu Varathan, regional economist in

Singapore for Mizuho Corporate Bank.

"Right now there is some disappointment here and there, but

overall still the consensus is that negotiations will result in

some kind of acceptable compromise."

The European single currency's rise helped push the dollar

to a six week-month low against a basket of currencies, with its

index falling to 79.663.

The Australian dollar recovered from initial

weakness after a widely expected interest rate cut by the

Reserve Bank of Australia (RBA). The rate was trimmed by 25

basis points to 3.0 percent, matching the previous record low.

PERIPHERAL VISION

Commodities struggled, however, as weak manufacturing data

and the U.S. budget talks fanned concerns about the health of

the global economy and prospects for energy demand.

Oil and gold both lost ground, while copper was little

changed. Brent crude oil dipped to $110.60 a barrel, and

gold fell about 1 percent to its lowest in nearly a month

after prices broke below key support levels.

With the euro zone mood lifting, Spanish, Italian and Greek

bonds rose while German Bunds stayed on the back foot, though

losses were limited by the potential impasse in budget talks.

Italian 10-year yields fell 5 basis points to

4.40 percent, while the Spanish equivalent was 3 ticks down at

5.24 percent, extending Monday's falls after

Greece unveiled better-than-expected terms for the debt buyback.

(Additional reporting by Emelia Sithole-Matarise; Editing by

Will Waterman and Anna Willard)

Most Popular in Business