European shares rally on hopes of Greek debt deal

European stocks rose on Tuesday, lifted by hopes of an agreement on the Greek debt standoff after the country’s new government dropped calls for a write-off of its foreign debt and proposed swapping debt for growth-linked bonds.

Athens’s benchmark index ATG gained 6 percent, with the country’s banks index rising 11.6 percent. National Bank of Greece climbed 12.9 percent, Alpha Bank was up 12.4 percent and Eurobank up 13.5 percent.

Shares in other southern European markets also outperformed, with Spain’s IBEX up 1.6 percent and Italy’s MIB up 1.8 percent.

Spain’s Santander featured among the top gainers, rising 3.3 percent after the euro zone’s biggest bank reported a nearly 70 percent jump in fourth-quarter profit, lifted by earnings from its lending business and as charges on soured loans fell.

Energy shares also rallied, led by a 4 percent gain in the shares of BP after the oil major beat profit expectations for the fourth quarter. Although it took a $3.6 billion impairment charge and cut capital expenditure due to low oil prices, it maintained its quarterly dividend at 10 cents per ordinary share.

At 0905 GMT, the FTSEurofirst 300 index of top European shares was up 1.3 percent at 1,486.73 points, with Germany’s DAX up 1.4 percent, hitting a record high.

Greek Finance Minister Yanis Varoufakis, in London to reassure private investors that he was not seeking a showdown with Brussels over a new debt agreement, said the new left-wing government would spare privately-held bonds from losses, a source told Reuters.

“Varoufakis is striking a more conciliatory tone with international creditors, offering to swap the debt, which is positive,” said John Plassard, senior equity sales trader at Mirabaud Securities in Geneva.

“Overall, the big trend on the market since late December is a clear preference for European stocks over US stocks, and the negative newsflow has had a low impact on Europe at the moment.”

So far this year, the FTSEurofirst 300 has gained 8.6 percent, boosted by expectations the European Central Bank’s quantitative easing program will help revive the region’s economy. By comparison, Wall Street’s S&P 500 is down 1.8 percent since the start of the year.

French nuclear group Areva bucked the trend on Tuesday, down 0.5 percent after it warned that it expects to book a significant increase in provisions and writedowns of assets in its 2014 accounts.

[Reuters]