European stocks rose to an 18-month high on optimism U.S. lawmakers will reach a budget deal. Italian bonds retreated for a second day after support dwindled for Prime Minister Mario Monti's government.
The Stoxx Europe 600 Index advanced 0.5 percent at 7:25 a.m. in New York, after gaining as much as 0.8 percent. Standard & Poor's 500 Index futures slipped less than 0.1 percent. The yield on Italy's 10-year bond jumped 14 basis points to 4.59 percent while German bunds gained. The euro was little changed at $1.3069. Copper snapped a five-day rally.
A few dozen Republicans joined a bipartisan push to break an impasse between President Barack Obama and House Speaker John Boehner over taxes for the highest-earning Americans, signing a letter calling for openness to "all options." A report showed the euro area's economy shrank in the third quarter before data in the U.S. on jobless claims. While Monti's government survived a confidence vote on a growth package in the upper house, the majority of lawmakers with Silvio Berlusconi's People of Liberty party didn't take part in the vote or abstained.
"There are distant signs that both parties should come to at least a short-term agreement," said Chris Weston, chief market strategist at IG Markets Ltd. in Melbourne. "Certainly the market is seeing it that way and giving the situation the benefit of the doubt."
Two shares gained for each one that fell in the Stoxx 600 as chemical companies and automakers advanced. European Aeronautic, Defence & Space Co. climbed 7.2 percent after the company said Germany will join France and Spain as a government shareholder in the largest revamp of ownership since the creation of EADS 12 years ago.
GDF Suez SA plunged 12 percent, the most in four years, after Europe's largest utility by market value said earnings will drop next year because of a "challenging" economy. Saipem SpA tumbled 7.5 percent, the biggest decline in more than a year on a closing basis, as Chief Executive Officer Pietro Franco Tali resigned amid an Italian probe into Algeria contracts awarded to the oil contractor.
Rolls-Royce Holdings Plc slid 2.9 percent, the most in four months. Europe's largest maker of commercial aircraft and ship engines said it unearthed possible wrongdoing in overseas business dealings and is under scrutiny by the U.K. Serious Fraud Office.
S&P 500 futures erased an earlier drop of as much as 0.3 percent. A Labor Department release at 8:30 a.m. in Washington may show 380,000 Americans filed initial claims for jobless benefits last week, down from 393,000 the prior period, according to economists in a Bloomberg survey. Data tomorrow is forecast to show U.S. payrolls rose by 86,000 workers last month, the smallest gain since June, according to the median forecast of economists.
The cost of insuring against default on European bank debt dropped to the lowest since May 2011, with the Markit iTraxx Financial index of credit-default swaps linked to 25 banks and insurers falling 4.5 basis points to 147.
The euro was little changed against the dollar and the yen before European Central Bank President Mario Draghi releases economic forecasts that include a first projection for 2014 following a policy meeting today.
The yield on 10-year Spanish notes rose 11 basis points to 5.52 percent. The yield on Germany's 10-year bond fell two basis points to 1.33 percent.
Ten-year Japanese bond futures for December delivery climbed as much as 0.25 to 145.24, the highest level reached by the most actively traded contract in records dating back to 1985.
Copper slipped 0.2 percent and silver lost 0.2 percent, the third consecutive decline and the longest slump since Oct. 30. Soybeans advanced as much as 0.8 percent to the highest since Nov. 9 on planting delays in South America. Oil rose 0.3 percent to $88.11 a barrel.
The MSCI Emerging Markets Index advanced 0.3 percent to seven-month high. Russia's Micex Index rose 0.6 percent and India's Sensex advanced 0.6 percent. The Shanghai Composite Index decreased 0.1 percent.
--With assistance from Adam Haigh in Sydney, Claudia Carpenter, Paul Dobson, Andrew Rummer, Michael Shanahan in London. Editors: Stephen Kirkland, Justin Carrigan, Stuart Wallace
To contact the reporters on this story: Stephen Kirkland in London at skirklandbloomberg.net; Jason Clenfield in Tokyo at jclenfieldbloomberg.net;
To contact the editor responsible for this story: Stuart Wallace at Swallace6bloomberg.net