European shares bounce back on Greek deal; miners up

European shares bounced back on Friday from three-month closing lows, with investor risk appetite rising on expectations Greece could avoid a default after international agencies gave their go-ahead for a five-year austerity plan.
The Euro STOXX 50 volatility index , one of Europe's main barometers of sentiment, fell more than 9%, indicating an increase in demand for assets such as equities.
Miners featured among the top gainers, tracking metals prices that rose on Greek news and as industrialised countries had tapped oil reserves to stimulate global growth. The sector index rose 2.4%, while Antofagasta jumped 5.2%.
The FTSEurofirst 300 of top European shares was up 1.2% at 1,088.55 at 0856 GMT, after falling 1.5% in the previous session. The index could close higher this week after losses in the previous seven weeks.
"This market is trading incremental news flow around Greece and sovereign issues quite hard and the agreement (between Greece and EU/IMF) has been received well by the markets," said Ian Richards, European equity strategist at RBS.
"We have got to get through the votes on June 28. It looks like it will go through, but it's not a formality. So the market is going to be cognisant of that near term risk."
European Union leaders promised more money to help Greece stave off looming bankruptcy, provided its parliament enacts the austerity plan. Greek Prime Minister George Papandreou promised to push through radical economic reform after his new finance minister clinched agreement with EU and IMF inspectors on tax rises and spending cuts to plug a 3.8 bln euro funding gap.
The positive news brought some relief to banks, many of which are exposed to highly-indebted countries such as Greece and Portugal. The Thomson Reuters Peripheral Eurozone Banks index jumped 2.3%, while European banks rose 1.1%.
Greek banks gained 4.2% and Greece's benchmark share index rose 2.2% as investors grabbed beaten-down stocks. But analysts said that the rally was not sustainable as doubts over Athens' ability to push austerity plans remained in the background.
The cost of insuring Greek debt against default rose as investors saw more hurdles for Greece.
"Probably this stock rally is not going to be sustainable.
Greece may have reached an agreement, but it is still got a vote in parliament next week," said the head of dealing at a fund company that manages $80 bln.
"I am not convinced that people in Greece are going to accept these austerity terms. I suspect you are going to see demonstrations after demonstrations."