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Europe ends sharply higher as banks rally and oil recovers; M&S tumbles

European equities finished Wednesday sharply higher, after a new debt deal for Greece and a recovery in oil prices lifted market sentiment.

The pan-European Stoxx 600 index ended trade up 1.3 percent provisionally, with banking, autos and energy sectors leading the gains.

German data released

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IBEX 35
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The London FTSE index closed up 0.7 percent, the French CAC jumped 1.1 percent while the German DAX rallied to close 1.5 percent up, following a survey that showed an improvement in German business confidence.

The closely-watched Ifo Business climate index rose from 106.7 points in April to 107.7 points in May. Ifo said that "business confidence in German industry and trade has improved in all four main sectors (manufacturing, construction, wholesaling and retailing)."

Meanwhile, oil prices moved closer towards $50 a barrel on Wednesday, driven by new figures by the U.S. Energy Information Administration who reported that U.S. crude stockpiles had fallen by 4.2 million barrels in the previous week.

In stocks, Royal Dutch Shell announced further job cuts and said it would reduce the size of its oil and gas output in Ireland and the U.K. as a result of falling oil prices. Shares however remained strong, finishing up 2.3 percent.

Banks rise

Elsewhere, the banking sector was Europe's best performing sector, jumping 3.3 percent. This comes after euro zone finance ministers agreed with Greece and the International Monetary Fund (IMF) on Wednesday on what they called a "breakthrough" deal that will address Athens' requests for debt relief.

After late-night talks into Wednesday, the Eurogroup ministers agreed to release 10.3 billion euros ($11.42 billion) for Greece after lawmakers approved more painful austerity measures over the weekend.

Athens' stock exchange reversed earlier gains to finish flat, however strong gains were still seen by banks across Europe. Shares of Unicredit closed 2.4 percent up on Wednesday, after the Italian bank announced late Tuesday that its CEO was to step down.

U.S. stocks traded higher around Europe's close, as traders kept an eye on the oil price.

M&S tanks over 10%; autos speed ahead

In individual stock news, the French government is considering selling part or all of its 14 percent stake in PSA Peugeot Citroen, according to Les Echos. Shares of the carmaker finished sharply higher, up 2.6 percent. Overall, autos closed 1.8 percent up.

Anheuser-Busch InBev ended around 1.7 percent higher, following news that the brewer had received EU antitrust approval for its acquisition of SABMiller on Tuesday. SABMiller finished roughly flat.

Among Europe's worst performers was British retailer, Marks and Spencer, who reported a rise in full-year profit on Wednesday and announced plans to overhaul its clothing and homeware business, a move it warned would have an adverse effect on short-term profits. The stock tumbled during trade, closing over 10 percent down.

The news added pressure onto other London-listed retailers including Tesco, Next and J Sainsbury. Tesco ended 2.3 percent off after Credit Suisse cut its price target on the stock.

Stagecoach pared sharp losses but ended over 1.5 percent lower, after JP Morgan cuts its price target and lowered its rating to "neutral". Meanwhile, Regus jumped 4 percent after RBS raised the stock to "outperform" on top of increasing its price target.

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