European shares climbed to three-week highs on Tuesday, extending the previous session’s rally on expectations that Greece was getting closer to a debt deal.
Shares in Belgian supermarket group Delhaize also surged nearly 9 percent after rival Ahold said the companies were in the final stages of merger talks.
Greece’s ATG share index rose 6.1 percent, adding to a 9 percent jump in the previous session, while the country’s benchmark banking index advanced 10.4 percent.
The Athens ATG index remains down about 4 percent since the start of 2015 because of Greece’s debt problems, but has recovered from a slump last week.
The euro edged lower, with some currency traders citing a range of still-formidable political barriers to a Greek debt agreement as weighing on the currency.
However, many other investors were confident of a deal.
Greece presented new budget proposals that euro zone leaders welcomed as a basis for a possible agreement to unlock frozen aid and avert a looming default.
“It now appears that we will have a short-term solution to the problems,” said Andreas Clenow, hedge fund trader and principal at ACIES Asset Management.
The pan-European FTSEurofirst 300 index gained 1.1 percent to touch its highest level in three weeks.
The euro zone’s blue-chip Euro STOXX 50 index — up 4.1 percent on Monday in its biggest one-day percentage gain since August 2012 — rose 0.8 percent.
Clenow expected a compromise on the Greek debt situation to push European markets back to peak levels reached in March and April, with the FTSEurofirst still up around 16 percent since the start of the year.
Numericable-SFR slipped 0.6 percent after France’s economy minister said a bid by Altice — Numericable’s majority owner — for Bouygues Telecom could create an operator “too big to fail”, and risk job cuts.
However, Paris’s broader CAC equity index rose 1.2 percent to move back within sight of its highest level in more than seven years as a resurgence of activity in France helped euro zone businesses to expand at their fastest rate in four years this month.
“The European economy has enough positives to herald a strong recovery even without an ever-falling exchange rate,” said Tim Crockford at Hermes Investment Management.