Greek Deal hopes boost Stoxx 600t to Highest Since 2007

European stock markets moved sharply higher on Wednesday, boosted by reports that Greece will ask for an extension to its loan agreement later this week.

The Stoxx Europe 600 index SXXP, +0.89% picked up 0.9% to end at 380.37, marking the highest close since November 2007. Greece’s Athex Composite index GD, +1.06% added 1.1% to 847.53, reversing after a 2.5% slide on Tuesday. Greek banks rallied, with shares of Piraeus Bank SA TPEIR, +4.87% up 4.9%, Eurobank Ergasias SA EUROB, +6.12% rising 6.1% and National Bank of Greece SA ETE, +6.78% 6.8% higher.

Greek progress: Sentiment in Europe was lifted by hopes that Greece and its international creditors were getting closer to an agreement on the structure of Greece’s bailout that will keep the country financially afloat when the current bailout program expires on Feb. 28.

Spokesman Gabriel Sakellarides said the Greek government was preparing to submit a request for an up to six-month extension to its loan agreement on Thursday, a day later than initially reported. So far, Greece only wants a new loan deal and is not looking for a continuation of the full bailout program, arguing that the stringent conditions of its lifeline are hurting the Hellenic Republic’s way of life.

Germany has already indicated that it won’t accept a loan agreement without a formal extension of the bailout program, including the strict austerity terms. Eurozone finance ministers have tentatively scheduled a meeting on Friday to discuss Greece’s debt deal, but will only meet if Greece has submitted a “credibly worded request” for an extension, according to a European official.

Meanwhile, Greece’s minister of state Alekos Flamboraris reportedly said the government might ask for an emergency EU summit to be held as the Greek crisis is as much a political as an economic issue.

If Greece doesn’t get some sort of loan or program extension before the end of the month, the country risks running out of money and defaulting on its debt. A meeting of eurozone finance ministers — the Eurogroup — broke down abruptly on Monday. Fitch Ratings warned on Wednesday that the Greek brinkmanship could do “lasting economic damage” and pointed to the risk of Greece re-entering recession. Read: Lew urges Greece’s Varoufakis to strike bailout deal

“The Greek government is proposing to reverse reforms, which is completely unacceptable for parliaments in Berlin, Den Haag or Amsterdam. We are still far away from a deal, and the risk of ‘Grexit’ remains elevated, at 35%,” said Christian Schulz, senior economist at Berenberg, in emailed comments on Wednesday.

Concerns have risen that Greece may withdraw from the eurozone if the country’s new antiausterity government is unable to come to an agreement with its international lenders.

Other European markets: The U.K.’s FTSE 100 index UKX, +0.00% ended flat at 6,898.08. The benchmark had traded as high as 6,921.32 earlier in the day, but the gains were dented and eventually erased by hawkish minutes from the Bank of England’s February meeting as well as solid labor-market data. A drop in the unemployment rate and rise in salaries will provide the BOE with more ammunition to eventually raise interest rates, which isn’t well-received by stock investors.

The pound GBPUSD, +0.46% on the other hand, rose to $1.5435, up from $1.5354 late Tuesday.

France’s CAC 40 index PX1, +0.95% climbed 1% to 4,799.03, while Germany’s DAX 30 index DAX, +0.60% gained 0.6% to 10,961.00.

Movers: Shares of Peugeot SA UG, +6.71% rose 6.7% after the French car maker said it narrowed its loss in 2014, boosted by strong sales in China and cost cutting.

Credit Agricole SA ACA, +7.60% jumped 7.6% after reporting better-than-expected fourth-quarter earnings. The French bank also said it would name its new CEO next week.

Accor SA AC, +2.21% gained 2.2% after the hotel group said profit rose 77% last year.

Carlsberg AS CARLB, -1.68% CABGY, -2.54% fell 1.7% after the Danish brewer reported a sharp drop in profit in the fourth quarter.

Swedish Match AB SWMA, -5.34% lost 5.3% after the tobacco company reported full-year earnings.

Source: MarketWatch