European shares were led higher on Wednesday by financial stocks, with sentiment improving on signs the European Union may rescue heavily indebted Greece.
At 0920 GMT, the FTSEurofirst 300 index of top European shares was up 0.7 percent at 987.67 points after gaining 0.2 percent in the previous session.
The index, which fell 4 percent last week, is up 53 percent from a record low in March 2009.
Banks were among the top gainers, with Standard Chartered, HSBC, Barclays, Lloyds, Royal Bank of Scotland, BNP Paribas and Societe Generale rising 0.5-3.6 percent.
Greek bank shares rose 6.8 percent.
But Nordea fell 3 percent after its fourth-quarter operating profit missed forecasts and the Nordic region's biggest bank by value said risk-adjusted profit would be lower this year than last.
"Maybe the market has exhausted its neurosis near term. You can't have a sell-off every day on the basis of Greece. The market is consolidating but is still in a cyclical bull phase," said Bernard McAlinden, investment strategist at NCB Stockbrokers, in Dublin.
Deteriorating confidence in the ability of Greece, Portugal and Spain to finance growing fiscal shortfalls has spooked financial markets for weeks and knocked the euro to its lowest since May 2009, just below $1.36.
European governments have agreed in principle to help Greece, German coalition sources told Reuters on Tuesday. A German government spokesman dampened hopes by saying a decision had not yet been reached.
"Bailing out Greece would be a positive move and help alleviate some of the fears that have affected the market," asked Manoj Ladwa, senior trader at ETX Capital. "But does it stop there? Who could be next to receive help with their debt levels and what point does the EU say enough is enough?"
RISK APPETITIE RISES
Investor appetite for risky assets such as equities rose, with the VDAX-NEW volatility index falling 2.7 percent. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the higher the market's desire to take risk.
Energy shares were also in demand, with BP, BG Group, Tullow Oil, Repsol and Total adding 0.4-1.2 percent.
Among individual movers, ArcelorMittal, the world's top steelmaker, fell 6.1 percent. It forecast higher shipments but lower prices in the first three months of 2010 and a core profit that could fall from a fourth-quarter figure that just missed expectations.
Global miner BHP Billiton was down 0.8 percent after signalling caution over a sustained global recovery and holdinb off from a share buyback when reporting its weakest first-half profit in four years.
French drugmaker Sanofi-Aventis rose 0.5 percent after saying earnings should rise 2-5 percent this year as growth areas, such such as vaccines, help it resist stronger competition from generic rivals.
Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 were 0.4-0.7 percent higher.
