Europe close: Stocks extend bounce, ride gains in oil higher

European stocks continued pushing higher on Wednesday, as oil prices recovered and investors sifted through some well-received corporate news.

The benchmark DJ Stoxx Europe 600 index closed up by 2.61%, Germany’s DAX was 2.7% higher and France’s CAC 40 gained 2.99%.

Oil prices reversed early declines to trade higher after Iran's petroleum minister, Binjar Zangeneh, welcomed the previous day's agreement between Russia and Saudi Arabia to freeze their oil output, describing it as a "positive first step".

On Tuesday, Russia, Saudi Arabia, Venezuela and Qatar agreed to cap oil output at January levels – contingent on Iran and other producers agreeing to it – but this did little to boost prices as market participants had been expecting a production cut.

However, Zangeneh was non-commital on whether the Central Asian country would commit to freezing its own output.

Furthermore, Shargh daily newspaper quoted the country’s OPEC envoy, Mehdi Asali, as saying: “Asking Iran to freeze its oil production level is illogical... when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices."

Nevertheless, front-month Brent crude oil futures were up 6.9% at $34.57 a barrel on the ICE. This helped to push the Stoxx 600 oil and gas index up 3.21% to 252.1 points.

A gauge of bank stocks advanced 3.24% to 146.35.

Despite the upbeat tone in markets and the recovery in oil, analysts were sceptical.

Capital Economics said that while the deal was important at face value, with the four countries already signed up accounting for around a quarter of world production, there were reasons to be cautious.

The think-tank pointed to the fact the deal is dependent on others joining, and that its success also depends on Russia playing its full part.

Finally, it argued that even if total OPEC output can be capped at its January level, this would still be “exceptionally high”.

On the corporate front, French bank Credit Agricole advanced after outlining plans to simplify its ownership structure.

Schneider Electric was also on the front foot. Although the company posted a drop in 2015, it also announced that it would speed up its share buyback programme.

Glencore rallied after it secured early refinancing of a $8.45bn loan facility.

Anglo American surged after Credit Suisse and Deutsche Bank lifted their target prices on the stock.

AstraZeneca nudged higher after announcing that it has won fast-track US regulatory approval for a particular application of its most promising cancer drug, Durvalumab.

Sainsbury’s was on the front foot after Exane BNP Paribas upgraded the stock to ‘outperform’ from ‘neutral’.

On the downside, ABN Amro lost ground after its fourth quarter profit missed expectations.