Europe close: Stocks gain on rally in banks and telecoms

LONDON (ShareCast) - European stocks gained, as a rally in telecommunication and bank shares offset concerns about Greece. Vodafone was a top riser after Liberty Global (NasdaqGS: LBTYA - news) chairman said a tie-up with the UK phone company would be a good fit for his cable business.

UBS , Barclays (LSE: BARC.L - news) and Royal Bank of Scotland (LSE: RBS.L - news) jumped after agreeing to pay fines to settle interest-rate rigging. JP Morgan Chase & Co. and Citigroup (NYSE: C - news) also agreed to pay a fine. The five banks will pay a combined penalty of $5.6bn to US and UK state authorities.

Barclays was hit the hardest with a fine of $2.4bn. "All of this was music to Barclays' investors' ears", according to analyst Connor Campbell from Spreadex, who said that the bank already had £2.5bn ($3.9bn) in provisions.

On a negative note for the market, German finance minister Wolfgang Schäuble warned that a Greek default can't be ruled out. Speaking to The Wall Street Journal and French daily Les Echos, he said he would not repeat an assurance he gave in late 2012 that Greek would default on its debt, as Athens and its creditors struggle to come to an agreement.

His remarks came amid reports Greece will miss its June debt payment to the International Monetary Fund unless the country receives more aid.

"Overall, we continue to believe an interim agreement will be reached before Greece's next IMF loan redemption of €0.3bn on 5 June that could, at least initially, unlock the disbursement of €1.9bn in ECB Securities Markets Programme profits to Greece," said Gizem Kara, senior European economist at BNP Paris. "But, if history is any guide, potential increase in tensions between the two sides and delays in the process cannot be ruled out." By 16:54 BST, the euro continued to drop against the dollar, down 0.63% to $1.1080.

The currency had fallen sharply on Tuesday after comments from European Central Bank members. ECB governing council member Christian Noyer said the monetary authority is prepared to take further action against inflation if needed and that the quantitative easing programme had already made a positive impact on prices.

The ECB's Benoit Coeure, meanwhile, said the bank would front-load asset purchases in May and June due to low market liquidity during the summer months.

On the corporate front, France's Altice surged after it said it was buying a controlling stake in US cable company Suddenlink in a deal valued at $9.1bn.

Lafarge (Paris: FR0000120537 - news) was in the red after it proposed to cut 380 jobs before it closes its merger with Holcim .

Shares (Frankfurt: DI6.F - news) in luxury retailer Burberry slumped after the company cautioned that it was seeing increased uncertainty in some of its markets and warned over the potential impact of currency movements in the release of its full-year results.

In commodities, oil prices advanced after government data showed that US crude inventories fell last week for the third straight week. Brent crude was up 1.41% to $64.94 per barrel.

Looking ahead, the release of minutes from the Fed's meeting at the end of April is due after the European close.

"Since removing its forward guidance earlier this year, the Fed has offered very little insight into when that first rate hike will come and that is making investors quite anxious, particularly around these kinds of releases.," said Craig Erlam, senior market analyst at Oanda.

The Fed has said that a rate hike will depend on data, but hasn't made it clear what they're looking for when they say they're waiting for further improvement, said Erlam.

"The impression I get is that the labour market is strong enough, the worry is productivity and wage growth which ultimately impacts the inflation outlook. If the Fed start to see evidence that productivity is improving then wages should improve and inflation hit its target within the forecasting period. As a result, I think a rate hike will come this year, possibly still in September," added Erlam.