* FTSEurofirst 300 up 0.7 percent, hits three-week high
* Chemical shares top gainers; Yara up 1.5 percent
* For up-to-the-minute market news, click on []
By Atul Prakash
LONDON, Dec 7 (Reuters) - European shares hit a three-week
high on Tuesday after U.S. President Barack Obama's deal to
extend tax cuts was seen helping the economy, though lingering
euro zone debt worries prompted investors to stay cautious.
At 0911 GMT, the FTSEurofirst 300 <> index of top
European shares was up 0.7 percent at 1,113.32 points, its
highest since mid-November. The index is up 6 percent this year,
after a 26 percent jump in 2009.
Shares in chemical companies topped the gainers list, with
the sector index <.SX4P> up 1.1 percent. Norwegian fertiliser
group Yara International <YAR.OL> rose 1.5 percent after saying
its prospects had improved along with demand for its
nitrogen-based soil nutrient. []
"The market is benefiting from the compromise in the U.S. on
the extension of the Bush tax cuts and to a lesser extent from
the probable voting of the Irish rescue package," said Philippe
Gijsels, head of research at BNP Paribas Fortis Global Markets.
The euro zone debt crisis remained a focus ahead of a budget
vote in Ireland.
Also, the bloc's finance ministers said on Monday they would
not be taking new measures to tackle the contagion, amid worries
the debt crisis could spread from Greece and Ireland, which are
already receiving EU bailouts, to Portugal and possibly Spain.
"Whilst there is some disappointment over the lack of EU
developments yesterday, another meeting provides a further
opportunity," said Keith Bowman, equity analyst at Hargreaves
Lansdown.
"Nonetheless, investors will again be turning their
attention to Ireland, given its budget announcement today, with
individual government resolve to reduce budget deficits still
high on the agenda for investors."
Financials fell, with the STOXX Europe banking index <.SX7P>
down 0.1 percent. BBVA <BBVA.MC>, Bankinter <BKT.MC> and
Barclays <BARC.L> fell 0.4-1.3 percent.
RISK APPETITIE IMPROVES
Appetite for risky assets such as equities improved, with
the VDAX-NEW volatility index <.V1XI> falling 3 percent to a
two-week low. The lower the index, which is based on sell and
buy options on Frankfurt's top-30 stocks <0#.GDAXI>, the higher
the market's desire to take risk.
Retailers featured among the top gainers, with British group
Tesco <TSCO.L>, the world's No.3 retailer, rising 1.7 percent
after it said overseas markets drove a 7.2 percent rise in
third-quarter sales. []
Shares in construction and materials companies also
advanced. The sector index <.SXOP> rose 1 percent, led by
Germany's biggest builder, Hochtief <HOTG.DE>, up 3.2 percent.
Investors also kept a close on developments in China, which
could raise interest rates in coming days to tame inflation.
Across Europe, Britain's FTSE 100 <>, Germany's DAX
<> and France's CAC 40 <> were up 0.5-0.8 percent.
The Thomson Reuters Peripheral Eurozone Countries Index
<.TRXFLDPIPU> was up 0.5 percent.
(Editing by Dan Lalor)
