LONDON, Dec 7 (Reuters) - European shares rose on Tuesday as U.S. President Barack Obama's deal to extend expiring tax cuts was seen helping the U.S. economy, although the lingering euro zone debt crisis prompted investors to stay cautious.
At 0809 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,110.09 points after gaining 0.1 percent in the previous session.
"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.
"We have seen horizontal markets with a lot of volatility. The next year will be an interesting and challenging year."
Focus stayed on the euro zone debt crisis. The bloc's finance ministers said on Monday they would be taking no new measures to tackle the contagion. The market waited for a budget vote in Ireland, which recently received an 85 billion euro bailout package.
Retailers featured among the top gainers, with Tesco, 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.
However, concerns China, the world's largest metal consumer, could raise interest rates in the coming days to tame inflation helped cap gains in equities. (Reporting by Atul Prakash)