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Europe ends sharply higher as Brexit concerns ease; FTSE up 3.6%

European stocks soared by Wednesday's close as global markets realized that any change to the status quo in the European Union (EU) after the Brexit vote is unlikely to change in the short-term.

The pan-European STOXX 600 jumped 3.1 percent at Europe's close, with all sectors except autos closing sharply higher.

London's FTSE index jumped 3.6 percent by the close, erasing all of the losses it made after the Brexit vote.

Meanwhile, the domestically-focused FTSE 250 popped 3.2 percent provisionally, while the French CAC jumped 2.6 percent and the German DAX trailed behind, up 1.75 percent.

Cameron speaks

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Europe continued its market rally from Tuesday's session—after at two-day sell-off—despite uncertainty over the U.K. and European Union's future relationship, after a majority of the British public voted last Thursday to leave the bloc.

On Wednesday, outgoing Prime Minister David Cameron addressed parliament saying that the U.K. economy faced turbulent times ahead, following its decision to leave the EU. Cameron went on to add that the new prime minister could begin negotiations with the bloc about its exit before the "Article 50" process is triggered.

This comes after he met with his European counterparts in Brussels on Tuesday, whereby pressure was applied to the U.K. to trigger Article 50 which sets in motion the process of withdrawing from the EU.

Sterling recovers

Despite the higher European markets, one analyst said that "mediocre global growth" and the European political crisis mean uncertainty will continue, and it's unlikely stocks will continue their upward trajectory.

"We have seen obviously a major sell-off on the back of this uncertainty and we haven't resolved anything. That's very important to understand and we have seen this in the past, solving issues like this in the European content takes a long time, and that means the uncertainty will be with us for a long periods of time, and in that period I cannot really see European equity markets or the U.K. advance in any major form," Sonja Laud, investment director of the Global Multi Asset Group at Baring Asset Management, told CNBC Wednesday.

Sterling recovered some of its losses seen in recent sessions, trading up against the dollar, at $1.3516 at Europe's close. Overseas, a sharp rise in oil prices helped boost U.S. stocks, while in Asia, markets closed higher, as Brexit concerns eased.

Banks edge higher

The banking sector—which has been beaten up in recent months—finished 2.5 percent up, despite some negative news for the sector.

Moody's changed its outlook on 12 U.K.-based banks Tuesday, after the country's referendum on European Union membership. Eight of the 12 banks, including Barclays, HSBC, Santander UK and TSB Bank, were downgraded to negative from stable. Shares of Barclays however jumped 4.9 percent, while HSBC also closed higher.

Italian banks were in focus after Italy's Prime Minister Matteo Renzi said he was talking to European institutions about how to support the country's lenders, and reports on Tuesday suggested that government money could be injected into the firms.

However, on Wednesday, an EU official told Reuters that while the European Commission was ready to support Italy's banking sector, it had not given its backing to Rome's plan to prop up the country's banks, in light of the Brexit turmoil. During the session, Italian banks pared some of their gains, including Mediobanca, closing up 3.5 percent, and Intesa Sanpaolo and Unicredit closing off their session highs.

Other stocks to watch

In individual stock news, Prudential shares popped 5.5 percent after Barclays said the firm was the one true large-cap growth stock in the European insurance industry.

And Amec Foster Wheeler shares rose 6.7 percent after the company announced a £75 million five-year contract with the U.K. Ministry of Defence to supply independent nuclear propulsion safety and technical advice for the Royal Navy's submarine flotilla.

Shares of France's Alstom jumped over 6 percent after Goldman Sachs raised its outlook on the stock to "buy" from "neutral". Meanwhile Weir Group was one of Europe's best performer, up 9 percent, after Goldman Sachs and UBS raised their target price on the stock.

A whole host of luxury stocks however finished lower, including Swatch Group, Salvatore Ferragamo, and Luxottica, after Goldman Sachs cut its price target on each of the stocks.

Travel stocks in focus

In the commodity space, basic resources popped some 3 percent, supported by slight weakness in the dollar and a recovery in metal prices. Anglo American popped 8 percent, with other London-listed miners Glencore, Rio Tinto and Antofagasta also posting gains of 3.9 percent or more.

Elsewhere, oil prices traded sharply higher, after the U.S. government reported a larger-than-expected weekly drawdown in crude inventories. Brent crude was hovering around $49.85 a barrel, while U.S. crude hit $49.13 at Europe's close.

In other news, at least 41 people have been killed and scores more wounded in what appeared to be a coordinated terror attack on Istanbul Ataturk Airport, Turkey's largest airport. A number of travel stocks including British Airways owner IAG, Lufthansa and EasyJet fluctuated in trade but closed mostly higher on the back of the broader rally. TUI was also at the bottom of Europe's benchmarks, off 3.8 percent, after JP Morgan cut its price target on the stock.

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