European stocks rose on Wednesday, boosted by gains in banks, acquisition talk and a lower oil price ahead of a Federal Reserve statement expected to hold rates and stop short of signaling imminent increases.
The pan-European FTSEurofirst 300 index ended 1.1 percent higher at 1,227.65 points, with banks the top-weighted gainers.
Barclays led the sector higher with a 6.5 percent jump after raising nearly $9 billion from investors including Qatar and Japan'sSumitomo Mitsui.
Credit Agricole jumped 7.3 percent, Royal Bank of Scotland gained 4.5 percent, HSBC rose 1.6 percent and Santander advanced 2.7 percent.
UBS jumped 5 percent as a source familiar with the situation said the bank had hired investment bank Lazard as an adviser to help decide which businesses should be expanded or slashed.
The DJ Stoxx European banking sector index, the sector worst battered by a crisis in credit markets, enjoyed its best day in more than two months, gaining 3 percent.
Wednesday's rally comes in the middle of a weak month for European stocks, which have lost 8 percent in June.
"This shows it is a gentle bear trend, and we don't see things getting materially worse materially faster, but things need to get materially better," said John Haynes, a strategist at Rensburg Sheppard Investment Management.
"I'd expect the general tone of corporate guidance to be pretty downbeat through the third quarter," he said.
Acquisition talk swirled, giving the market another shot in the arm.
German auto parts supplier Continental jumped nearly 9 percent on resurgent talk of private equity bid interest. The company declined to comment.
And Deutsche Postbank rose 6.8 percent on a tide of European bank takeover speculation even as German banks signaled unwillingness to overpay for the country's biggest retail lender.
ING, Lloyds TSB, Deutsche Bank andSantander were among interested parties, sources familiar with the situation said.
Their stocks rose by between 0.8 and 2.7 percent.
Fed on Hold?
The Federal Reserve is widely expected to stay put at 2 percent when it announces its rate decision at 2:15 pm New York time, but the Fed's tone on inflation versus growth will be carefully watched.
The bank is expected to indicate slightly greater unease on inflation but stop well short of signalling that higher rates are imminent.
"If they don't keep rates steady they've obviously forgotten how to speak English," said Haynes.
"Everybody's on message so anything that deviates from that either in the action or the interpretation of the action will be met with raised eyebrows, but I don't see any reason why they will deviate from that," he said.
Earlier, data showed that U.S. durable goods orders held steady last month but sales of new single family homes fell, highlighting a weak economy.
One of the major drivers of inflation worry, crude, slid $4 a barrel after U.S. weekly data showed an unexpected increase in crude oil inventories and sluggish fuel demand.
This was supportive of the broader market, but hurt stock in Shell and Total, which lost 0.7 percent and 0.3 percent respectively.
"On the one hand we have inflation and interest rates and on the other hand, slower growth, and both are working against us," said Fortis strategist Philippe Gijsels, adding that the result may well be a shift of capital away from equities, although low company valuations remained in favor of the asset class.