European shares pushed higher today, with investors betting Greece will be able to pull off a key bond swap and avoid a chaotic default, and also reflecting optimism about prospects for companies with global exposure.
The markets, however, is likely to remain volatile ahead of a deadline this evening on the Greek bond swap offer to private creditors, and also ahead of tomorrow's keenly-watched US jobs report.
"This has been the game of anticipation. I think it's likely to remain volatile but overall ... we would be expecting more upside potential moving into next week," Luca Solca, global head of European research at CA Cheuvreux, said.
"I think the rally would take shape expanding into higher beta names, we have been expanding into stocks like Commerzbank."
Commerzbank, whose beta of 1.8 suggests it is 80 per cent more volatile than the broader market, added 2.3 per cent.
The banking sector as a whole, whose sovereign debt holdings make it highly sensitive to the fresh twists and turns of the Greek debt saga, added 2 per cent.
The Euro STOXX 50 index of euro zone blue chips rose 1 per cent to 2,469.34 points, extending gains partly on speculation that China could loosen monetary policy to stimulate economic growth.
After finding support at the 50-day moving average around 2,444 today, the Euro STOXX 50 still has around 50 points to climb to reverse a steep sell off seen on Tuesday.
According to technical analysts at Day By Day, the index remains in a correction phase from this year's rally - which has taken it up 8.7 per cent in two months - between 2,398 and 2,495 points.
For some, though, the more upbeat market mood is a reason to start selling. BNP Paribas' European Love-Panic indicator, designed to track price action attributed to investor sentiment rather than fundamentals, has moved into convincingly positive territory, which the bank interprets as a signal to buy protection against possible weakness.
It recommends a September 2012 options trade known as a "put ladder" on the Euro STOXX 50 at 2,540, 2,200 and 1,950 for a 1.9 per cent premium.
The broader FTSE Eurofirst 300 added 1.2 per cent to 1,063.87.Among individual stocks, companies with global exposure performed strongly, while those relying on domestic consumers suffered as high unemployment led people to tighten their belts, hurting profits.
Belgian supermarket group Delhaize and German consumer goods group Henkel fell after posting weaker than expected results.