Shares, euro gain as Spanish bailout progress awaited

Signs of progress in tackling Spain and Greece's economic problems lifted European shares and the euro marginally on Monday, but commodities were largely steady due to data giving mixed signals on China's economy.

Stock index futures pointed to a higher open on Wall St, albeit after U.S. shares ended their worst week in four months on Friday .

However, the optimism was cautious and moves in all markets were limited before of a batch of Chinese data due later this week and a European Union summit which begins on Thursday.

"There is a lot of caution around because economic growth does look difficult from where we are, while the debt situation in Europe remains challenging," said Keith Bowman, equity analyst at Hargreaves Lansdown.

The FTSEurofirst 300 index <.FTEU3> of top European shares was up 0.7 percent at 1,101.19 points by the midsession, having lost 0.5 percent on Friday, as signs that Spain was inching toward asking for a euro zone bailout lifted the mood.

Euro zone sources told Reuters over the weekend that Spain could formally request the bailout in November and if it does, this was likely be dealt with alongside a revised loan programme for Greece and help for Cyprus in one big package.

"The mood is improving, but we need the details about how Spain will be bailed out and how policymakers will avoid repeating the mistakes made when Greece was rescued," Agilis Gestion fund manager Arnaud Scarpaci said.

The better tone lifted the euro against the dollar by 0.2 percent to $1.2975..

The signs that Greece may get a fresh loan programme as part of the November package prompted big gains in Greek debt, where yields fell to their lowest since August 2011.

Demand for Greek bonds has been steadily improving as a result of recent comment from German officials, including Chancellor Angela Merkel, about the Athens government's efforts on economic reform. This has eased fears that Greece would ultimately forced out of the euro zone.

The benchmark Greek 10-year bond yield was 64 basis points lower on the day at 17.42 percent, although traders noted the moves were not based on large-scale buying.

CHINA OUTLOOK CLOUDED

Traders in the dollar and commodity markets were more focused on China, which releases third quarter GDP figures this week. These are expected to show that growth in the world's second largest economy slowed for a seventh straight quarter in July-September to 7.4 percent.

September data released over the weekend showed that while Chinese inflation was subdued, opening the way for the central bank to ease policy, exports had rebounded at nearly twice the rate expected, curtailing the need for additional policy action.

Stephen Green, head of China research at Standard Chartered Bank, said seasonal factors may have influenced the export numbers as companies met Christmas demand in the West.

"They (the export numbers) were not bad, and they are not getting worse, but they are still not enough to get excited about," he said.

The mixed signals left the dollar index unchanged against a basket of currencies at 79.64 but the commodity-linked Australian dollar rose about 0.1 percent to $1.0245.

The uncertainty over future Chinese demand also had a limited impact on dollar-denominated commodities. Copper was near a one-month low at $8,110 a tonne, Brent crude oil rose to $115.15 a barrel and gold extended recent losses to touch a 2-1/2-week low of $1,741.24 an ounce.

"There is an air of uncertainty today ... which makes it hard to predict what (the Chinese government) will do next," said Andy Du, derivatives director at Orient Futures.

However, the Chinese data was in line with other information from major exporting nations which points to a pickup in trade following efforts by the world's major central banks to boost activity.

"The September jump in export orders was twice as high as expected, coming on the back of better export orders released from Germany, Taiwan and Korea, indicating a rebound of global trade," Morgan Stanley said in a note to clients.

(Additional reporting by Blaise Robinson, Anirban Nag and Carrie Ho.; Editing by David Stamp)