European shares rise as Sandy damage seen limited


European shares and the euro rose on Tuesday as the initial damage inflicted by a powerful storm on the U.S. east coast looked to have been less severe than many had expected.

The FTSEurofirst 300 index of top European shares opened up 0.5 percent, although damage from the storm, codenamed Sandy, was still extensive. The euro was up 0.3 percent at $1.2941.

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London's FTSE 100 , Paris's CAC-40 and Frankfurt's DAX were all in positive territory having finished Monday on the back foot.

"Mostly it is because the storm in the U.S. has not been as bad as feared," said Daiwa Securities economist Tobias Blattner. "We did also have a some slightly better than expected Spanish data, but that is unlikely to have contributed that much."

Spain reported its economy shrank 0.3 percent in the third quarter beating economists' forecasts and the previous reading of a 0.4 percent decline registered between March and June.

Elsewhere in currency markets, a new plan from the Bank of Japan to increase its asset purchases by 11 trillion yen ($138 billion) proved less than dramatic, pushing the yen to its highest level against the dollar for a week.

German government bonds, the benchmark of European fixed income markets, were flat as bond investors focused instead on Italy's latest five-year bond auction at around 1000 GMT. Rome will probably have to accept higher borrowing costs as growing fears of domestic political instability return.

"The market will have to get used to higher volatility as Italy approaches elections next spring," said Chiara Manenti, bond analyst at Intesa SanPaolo.

The most notable market impact from Sandy, one of the biggest storms ever recorded in the United States, was felt in oil prices, as shutdowns of industry and commerce along parts of the northeast U.S. coast reduced consumption.

Brent oil was down 0.1 percent at 109.31 a barrel at 0850 GMT. U.S. stock and bond markets will be closed again on Tuesday.

(Reporting by Marc Jones; Editing by Alastair Macdonald)