* FTSEurofirst 300 up 0.5 pct, Euro STOXX 50 up 0.4 pct
* DAX hits record high, CAC 40 reaches 5-year high
* Burberry drops 5 pct after CEO leaves
* Nexans sinks 13 pct on profit warning, capital increase
By Blaise Robinson
PARIS, Oct 15 (Reuters) - European shares rose early on Tuesday, gaining ground for the fourth session in a row, boosted by signs that a deal could soon be reached in Washington to avert a damaging debt default.
At 0726 GMT, the FTSEurofirst 300 index of top European shares was up 0.5 percent at 1,259.15 points, while the euro zone's blue-chip Euro STOXX 50 index added 0.4 percent to 2,988.35 points, hitting a fresh 2-1/2 year high.
Positive signals from talks on Monday between Democrat and Republican Senate leaders fuelled hopes of an imminent deal to reopen shuttered U.S. federal agencies and prevent a default on federal debt, sending world stocks higher.
"Relief that politicians have taken the U.S. to the edge and back again is clear," said Keith Bowman, equity analyst at Hargreaves Lansdown.
The plan under discussion would end a partial government shutdown and raise the debt ceiling by enough to cover the nation's borrowing needs at least until mid-February 2014.
Around Europe, the UK's FTSE 100 index was up 0.6 percent, France's CAC 40 was up 0.3 percent, reaching a five-year high, and Germany's DAX index was up 0.5 percent, hitting a record high.
"The consensus is bullish, everyone believes that a deal will be reached, so it could already be priced in," said Guillaume Dumans, co-head of research firm 2Bremans.
"Deal or no deal, the size of the U.S. debt remains abyssal, and given the excess of optimism on the market right now, we could get a pull-back."
Shares in UK luxury goods maker Burberry Group dropped 5 percent following the departure of long-standing boss Angela Ahrendts to Apple.
Casino rose 3.6 percent after the French supermarket chain said sales growth accelerated in the third quarter thanks to robust demand in Brazil.
French cable maker Nexans plummeted 13 percent after slashing its profit outlook and unveiling a capital increase.
Investors will keep a close eye on U.S. corporate results on Tuesday, with several major U.S. companies including Citigroup , Intel, Johnson & Johnson and Yahoo scheduled to report earnings.
On the macroeconomic front, focus will be on German ZEW economic sentiment indicator, seen at 49.6, at 0900 GMT.