LONDON, Nov 28: European shares recovered to close slightly higher on Wednesday, hauled up with US stocks on signs that lawmakers in the United States will be able to avert the “fiscal cliff” that threatens its economy.

The FTSEurofirst 300 index closed 0.2 per cent higher at 1,109.27 points, after falling to a low of 1,100.79 earlier in the session, supported by a 0.5 per cent gain in chemical shares. The eurozone's blue chip Euro STOXX 50 index was up 0.1 per cent at 2,546.84.

“Just 24 hours ago there was a feeling that Democrats and Republicans were a lot further apart. Now it seems they are really willing to cut a deal on (the fiscal cliff) and get it right for the United States,” said Angus Campbell, head of market analysis at Capital Spreads. “There is a degree of optimism that a deal will be reached before the year end.”

Talks on a budget deal, without which $600 billion of large tax hikes and spending cuts will come into effect in January, have been moving markets for weeks.

US stocks sharply pared losses on Wednesday after US House Speaker John Boehner said he was optimistic that a deal could reached, just a day after US Senate Majority Leader Harry Reid reported disappointing progress on the issue.

“Boehner's comments should go some way towards mollifying the market's fears, although there's clearly a lot of work still to be done,” said Jeremy Batstone-Carr, head of private client research at Charles Stanley.—Reuters