London - European shares made significant gains for the first time in more than a week on Wednesday, with banks rising after strong results from US financials and on optimism that stress tests will boost the sector's outlook.
The FTSEurofirst 300 index of top European shares rose 1.1% to close at 1 017.88 points, though it had been up more than 2% earlier. The index is still down more than 8 percent from a mid-April peak on worries about debt levels in Europe and the strength of economic recovery.
European banks to gain included BNP Paribas, Barclays, Credit Suisse, HSBC and UBS, up between 1.3% and 2.4%.
US bank Morgan Stanley reported higher than expected second-quarter profit in spite of weak industry trends, sending its shares up more than 9%.
"Good corporate earnings numbers from the banking sector helped," said Bob Parker, vice chairman of asset management at Credit Suisse. "And we bounced off good technical resistance points, having fallen earlier in the week."
The stress tests, the results of which are due to be released on Friday, will be rigorous and have credibility, said Parker, adding: "Most will pass, and for those that don't there will be a plan to deal with them."
The market's rally was fairly broad-based, though miners were another strong performing sector.
Copper rose to its highest in more than three weeks on Wednesday due to strong physical buying and falling inventories.
Antofagasta, Fresnillo, Kazakhmys, Vedanta and Xstrata rose between 3.1% and 7%. BHP Billiton rose 2.5% after reporting a 16% jump in quarterly iron ore output, taking annual production to a record,
Wall Street was lower around the time European bourses were closing. The Dow Jones, S&P 500 and Nasdaq Composite were down between 0.2% and 0.7%.
As well as Morgan Stanley, Apple's results boosted sentiment, but internet firm Yahoo helped to limit gains, falling 8% after revenue trailed estimates.
The results were the latest in a batch of second-quarter earnings that has also included some disappointments among financials, such as Bank of America.
Across Europe, Britain's FTSE 100 ended the day up 1.5%; Germany's DAX and France's CAC 40 rose 0.4% and 0.8%, respectively.
Fiat surges
Among individual companies, Fiat surged 6.7% after the Italian car maker's quarterly profit beat expectations and it said it might raise its targets later this year.
Consumer brand company SSL International rose 33.5% after consumer goods firm Reckitt Benckiser agreed to buy the Durex condoms and Scholl sandals maker for $3.8bn.
BP rose 3.2% after announcing it would sell $7bn of assets to Apache.
BP needs to raise funds following an oil spill in the Gulf of Mexico, and its shares are still down more than 39% from a mid-April peak, before the scale of the problem became apparent.
Drugs giant GlaxoSmithKline ended the day 1.1% up after its results.
The Euro STOXX 50, the euro zone's blue-chip index, rose 0.5% to 2 639.52 points, having earlier gone through a key resistance level of 2,669.29, the index's 38.2% Fibonacci retracement of the April high to the May low.
In an effort to calm investors' jitters over the potential impact of the euro zone debt crisis on Europe's banking system, regulators are assessing how 91 banks across Europe would cope with another economic downturn, and the results are due on Friday after the closing bell.
- Reuters