European equities pared gains on Wednesday but ended firmly in positive territory, buoyed by new hopes that a deal could be found between Greece and its lenders.
The pan-European Stoxx 600 index closed around 1.5 percent higher, down from earlier highs after Greek Prime Minister Alexis Tsipras appeared to make concessions to the country's creditors on reform proposals.
According to a letter to lenders sent on Tuesday and seen by the media Wednesday, Tsipras accepted a number of the creditors' conditions that were suggested last weekend.
However, he did stick to his guns on some proposals, including the 30 percent VAT discount for Greek islands that creditors wanted abolished.
Markets rallied on the news, first reported by the Financial Times, but not everyone was convinced that the letter foreshadowed a deal between Greece and its international lenders.
"This is not quite the climb-down it seems," said Peter Chatwell, senior rate strategist at Mizuho International, in a note.
"I strongly doubt Europe will accept this proposal and if Europe sticks to its guns and waits for the referendum, the greater the chance that the government fails."
This came after Greece failed to make the 1.5 billion euro ($1.7 billion) debt repayment due to the IMF on Tuesday.
Crucially too for Greece, the European Central Bank is expected to review its emergency liquidity assistance (ELA) for Greek banks later on Wednesday.
Greek stocks are closed this week ahead of a referendum on Greece's bailout program and austerity measures on Sunday.
Auto stocks rallied to close around 2.9 percent, as European stalwarts like Peugeot, Renault, Daimler, Continental, Porsche and Volkswagen climbed after an upgrade from investment group Exane and data showed French car sales jumped 15 percent in June.
Serco finished around 6.5 percent higher, down from earlier gains, after the company said trading had been "a little better" than expected in the first half, and reaffirmed its full-year guidance.
Airbus Group also finished higher—up 2.5 percent—after China placed an order for dozens of jets from Airbus in a multi-billion dollar deal.
Meanwhile, manufacturing data for the euro zone revealed that activity in June hit a 14-month high. Markit's Manufacturing Purchasing Managers' Index rose to 52.5 from 52.2 in May.
U.S. stocks traded higher on Wednesday, as investors eyed better-than-expected data and the latest developments between Greece and its creditors.
The ADP private sector employment report showed creation of 237,000 jobs in the U.S., topping expectations of 218,000.
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