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European Shares Power to 3-Week Highs, Led by Spain

Europe's equity market powered to three-week highs on Wednesday, with the Madrid bourse and the banking sector bolstered by news that Spain had escaped a rating downgrade to 'junk' and hopes that it will soon seek a bailout.

Rating agency Moody's late on Tuesday affirmed Spain's investment grade debt rating , on the assumption that Madrid would formally ask for help and trigger the European Central Bank's sovereign bond buying rescue plan.

Reuters reported that Spain was likely to seek a precautionary credit line of around 50 billion euros ($64.7 billion) from the European Central Bank (ECB) , potentially triggering the ECB's bond-buying program. The Financial Times also reported that opposition to a Spanish bailout had reduced in recent days.

"Whether it is tomorrow, or one week, or two weeks for the help to be given to Spain ... it has to be done, " Vincent Guenzi, chief strategist at Cholet Dupont, said.

As the situation in the euro zone improves, the market could see more buyers return, he said, with sentiment also supported by a brightening economic backdrop in the United States.

"There are a lot of participants that are still under-invested in European equities... altogether I think we will go through and finish the year at a higher level, " he added, calling the Euro STOXX 50 to end December at 3, 800 points.

The blue-chip Euro STOXX 50 index advanced 0.9 percent to 2, 570.63 points on Wednesday, while the FTSEurofirst 300 index provisionally closed up 0.5 percent at 1, 118.71.

Regionally, the top performers were Spain (boosted by the country's banks BBVA and Bankia ), Italy and Greece, with the latter's benchmark index hitting 13-month highs.

Across Europe, the basic resources closed sharply higher on Tuesday.

U.K. based mining company BHP Billiton released July to September output figures on Wednesday. It reported that iron-ore production had risen 1 percent to 39.8 million tons from a year ago, but was still down 3 percent from the previous quarter.

Shares of Zurich Insurance closed sharply lower, as the firm said on Wednesday that its third-quarter operating profit will be hit by a $550 million pretax charge.

French food producer Danone released third-quarter sales figures reporting a deterioration in their sales in Southern Europe.

Chip equipment maker ASML Holding said on Wednesday it would buy Cymer, a supplier of lithography light sources for $2.5 billion. ASML also released third-quarter earnings.