European shares seen sharply higher on U.S. debt deal

(Reuters) - European shares were expected to bounce back on Monday, mirroring strong gains in Asia, after U.S. lawmakers agreed on a deal to increase the borrowing limit to avert a default.

Futures for Euro STOXX 50, for Germany's DAX and for France's CAC were 1.2 to 1.4 percent higher. Financial spreadbetters predicted Britain's FTSE 100 .FTSE to gain as much as 1.2 percent on the last-minute U.S. debt deal.

Just two days before a deadline to lift the U.S. debt ceiling, the White House and both Republican and Democratic leaders in Congress said on Sunday the compromise would cut about $2.4 trillion from the deficit over the next 10 years. Both the Senate and House of Representatives are expected to vote on Monday.

"The package still has to be voted on and that's something that should happen in the next couple of days, but at least markets in general are finding some cheer off the news that default appears to have been averted," Cameron Peacock, analyst at IG Markets, said.

"Obviously there's now going to be a degree of waiting as traders sit tight for the formal side of the transaction to take place in Washington and with August now upon us, already depressed volumes could well be even lower."

Investors and economists said the United States faced the risk of a costly credit downgrade despite a debt deal.

On Monday, Japan's Nikkei average .N225 surged 1.3 percent, while the MSCI index of Asia Pacific stocks outside Japan was up 1.6 percent .MIAPJ0000PUS. European shares .FTEU3 fell 0.7 percent on Friday on U.S. debt woes and some disappointing economic data.

Focus will continue to be on company earnings and economic numbers this week. Euro zone manufacturing PMI data will be released at 0758 GMT, while in the United States, both July ISM data and June construction spending numbers are due at 1400 GMT.

In China, factories struggled with their weakest activity in 28 months in July, as manufacturers grappled with credit shortages and softening global demand. The figures might reduce some pressure on Beijing's monetary tightening policy.

Resource-related shares are expected to be in demand as key base metals prices advanced and crude oil jumped 1.2 percent.

COMPANY NEWS

AIR LIQUIDE (AIRP.PA)

The world leader in industrial gases posted a strong rise in first-half profits, despite Japan's earthquake and unrest in the Middle East, as it benefited from buoyant emerging markets.

EADS (EAD.PA)

EADS is poised to step up a recent buying spree with a space industry acquisition in Europe that could rank among its biggest efforts to expand, sources familiar with the matter said on Sunday.

HSBC (HSBA.L)

The bank said on Sunday it will shed nearly half of its under performing U.S. branch network, selling 195 branches to First Niagara Financial Group Inc (FNFG.O) for about $1 billion, and closing 13 others.

INTERNATIONAL AIRLINES GROUP (ICAG.L)

American Airlines (AMR.N) has raised the prospect of a full merger with British Airways and Iberia (ICAG.MC) in a move that would create the world's biggest airline, the Times said.

TOTAL (TOTF.PA)

Total reported that a boiler trip caused a compressor upset at an unspecified unit and a coker at its 232,000-barrels-per-day Port Arthur, Texas refinery, a filing with state pollution regulators showed.

BAYER (BAYGn.DE), MERCK KGAA (MRCG.DE)

Debt-stricken Greece owes German drugmakers 1.2 billion euros ($1.7 billion), weekly magazine Der Spiegel reported, citing industry association BPI. Related news DRU-DE-E

ILIAD (ILD.PA)

A group led by the founder of French telecom firm Iliad on Sunday deposited the guarantees needed to secure its right to buy a mobile operator's license in Israel, the Communications Ministry said.

SERCO (SRP.L)

The British outsourcing group said it has signed an A$1.3 billion (850 million pound) contract with the Western Australian Department of Health to provide support services to a hospital near Perth.

EIFFAGE (FOUG.PA)

France's third-largest construction group Eiffage posted a 2 percent rise in second-quarter sales on Friday and a stronger order book. Eiffage, which competes with companies including Vinci (SGEF.PA) and Bouygues (BOUY.PA), said its order book stood at 11.3 billion euros on July 1, representing an increase of 5 percent on a year earlier.

E.ON (EONGn.DE)

E.ON plans to shut three of its businesses in Germany, affecting hundreds of jobs, to cut costs and cope with the effects of nuclear phase-out, Der Spiegel said. Separately, weekly magazine Focus cited sources close to the negotiations as saying that talks between E.ON and Russia's Gazprom (GAZP.MM) were close to failing. Related news EONGn.DE-E

INTESA SANPAOLO (ISP.MI)

Italy's biggest retail bank has reached a deal with unions over thousands of planned lay-offs in Italy, the FABI banking union said in a statement on Friday. The 2011-13 plan includes 3,000 retirements and up to 5,000 job relocations or voluntary exits. The bank also agreed to 1,000 new hirings.

DAIMLER (DAIGn.DE)

The carmaker aims for its premium car brand Mercedes-Benz to surpass rivals BMW (BMWG.DE) and Audi (VOWG_p.DE) in terms of sales volume and profitability, Daimler Chief Executive Dieter Zetsche said in a letter to employees, according to Automotive News Europe. Related news DAIGn.DE-E

LINDE (LING.DE)

The industrial gases company will expand outside Europe more than planned if politicians fail to resolve the European debt crisis, weekly magazine WirtschaftsWoche cited its CEO Wolfgang Reitzle as saying. LING.DE-E

(Reporting by Atul Prakash)