Europe close: Stocks rise as risk-apettite picks up

European stocks racked up healthy gains on Wednesday, underpinned by rising oil prices, Greece’s deal with creditors and a better-than-expected reading on German business confidence.

The benchmark Stoxx Europe 600 index finished 1.29% or 4.44 points higher to 348.56, Germany’s DAX gained 1.47% or 147.90 points to close at 10,205.21 and France’s CAC 40 was 1.13% or 50.12 points stronger at 4,481.64.

Meanwhile, Greece’s ASE index was up 0.04% to 641.8 despite news that Athens had reached a deal to unlock €10.3bn in loans from its creditors in return for fiscal reforms.

"The agreement reached between Greece and its eurozone creditors reduces the risk of another Greek liquidity crisis this summer, and incentivises the country to complete its third bail-out programme. However, with little debt relief offered upfront, the Greek government may find it progressively more difficult to continue with politically controversial measures required to meet ambitious programme commitments. Implementation risk therefore remains high," analysts at Fitch Ratings said.

Oil prices gained ground after data from the International Energy Agency, the Department of Energy´s statistical arm, said crude stockpiles in the States fell by 4.2m barrels last week.

West Texas Intermediate was up 0.59% to $48.91 a barrel and Brent crude was 0.998% firmer at $49.10.

“After three weeks of lacklustre market performance, investor sentiment has finally turned more positive, with markets up strongly, adding to the significant gains seen yesterday. The increased probability of a Remain vote alongside aid agreement on Greece (albeit somewhat diluted) and a more optimistic view of the US economy have all combined to encourage investors back to the table,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor.

In corporate news, Marks & Spencer was firmly under the cosh after reporting a drop in full-year profit and warning that short-term profit would take a hit from plans to turn around the clothing business.

German chemical and pharmaceutical company Bayer was in focus after US agriculture giant Monsanto rejected the company’s bid, saying it was “financially inadequate”.

Royal Mail was higher after the postal regulator decided not to impose any new price controls on the company’s wholesale or retail products but kept the cap on stamp prices and proposed tightening some rules in the 'access' market.

Pharmaceutical company Novo Nordisk rallied after the US Food & Drug Administration recommended the approval of its new diabetes drug.

There was some good news on the data front, as a widely-followed survey showed German business confidence improved more than expected in May.

The IFO Institute’s business climate index rose to 107.7 from 106.7 in April, beating economists’ expectations for a reading of 106.8.

Meanwhile, the expectations index increased to 101.6 from 100.5, surpassing expectations of 100.8, while the index of current conditions pushed up to 114.2 from 113.2.

Pantheon Macroeconomics noted the improvement in sentiment was seen across all industries with the rebound in retail sentiment, and further upturn in construction confidence the stand-out details.

“Overall, the IFO indicates that the cyclical recovery is resilient to increased volatility in financial markets and subdued global growth, but it also indicates that growth will slow in Q2, following a sizzling Q1.”