Stocks rally on reports of Greece close to agreement

European stocks rallied on the news that Greece has started crafting an agreement with its international bailout supervisors.

The Athens Composite closed around 3.6 percent higher, while the pan-European FTSEurofirst 300 ended provisionally up 1.3 percent. The euro also spiked on the news.

Greece and its bailout supervisors will start writing a "staff level agreement" on Wednesday, sources close to the talks said. This comes after months of battling between Greece far-left government and officials over an aid-for reforms deal.

The sources said the agreement would involve no cuts to Greek wages or pensions, which had been a sticking point in negotiations.

Athens Stock Exchange
Aris Messinis | AFP | Getty Images
Athens Stock Exchange

According to the sources, differences between the European institutions (the European Central Bank and the European Commission) and the International Monetary Fund were holding up a deal.

"If the agreement of the IMF was not required, we now have closed the deal," said the source.

Commenting on the news, Peter Boockvar, chief market analyst at The Lindsey Group, said: "The deadline we know is fast approaching and the assumption will be another can-kick deal.

"If there is none and Greece defaults, I honestly don't know what the full repercussions will be at this point, as Greece is a political problem, not an economic one for the euro region."

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