* Euro STOXX 50 up 1.8 pct, FTSEurofirst 300 up 1.9 pct
* Euro zone banking index rises 2.1 pct after Greek deal
* Mid-cap Alent surges 44 pct on M&A news (Updates with closing prices)
By Atul Prakash and Alistair Smout
LONDON, July 13 (Reuters) - European shares rose on Monday after euro zone leaders reached agreement on a bailout for Greece after all-night talks in Brussels.
Euro zone leaders made Greece agree to strict supervision on Monday in return for agreeing to talks on an 86 billion-euro ($94.95 billion) bailout to keep the country in the single currency.
The Athens Stock Exchange has been closed since June 26, but Greek equity assets listed in the United States climbed on the news.
While markets cheered, some advised caution. The agreement must still pass parliaments in Greece, Germany and elsewhere.
“We’re seeing a relief rally ... and a shift back into a modest ‘risk-on’ mood as some of the worst fears have been removed,” said Andrew Milligan, global head of strategy at Standard Life Investments. “As we go through the details, however, it’s very clear that there is a sizeable number of hurdles to jump over, especially in Athens.”
The euro zone’s Euro STOXX 50 index hit a two-week high and was up 1.8 percent by the close. The index has gained about 9 percent since last Tuesday’s close.
The pan-European FTSEurofirst 300 index rose 1.9 percent to 1,572.05 points. Germany’s DAX, France’s CAC and Britain’s FTSE 100 rose 1 to 1.9 percent.
The euro zone’s banking index advanced 2.1 percent, helped by gains for Societe Generale, Credit Agricole and UniCredit, the shares of which were up by 1.6 to 3 percent
The region’s volatility index, a crude indicator of investor concern, dropped 4.6 points to hit a two-week low.
Ronny Claeys, senior strategist at KBC Asset Management, said that in the long run investors will try to find answers to various questions, among them whether the deal Athens has agreed with its European peers fundamentally resolves the issue of Greece’s debt burden.
Shares in mid-cap Alent spiked 44.2 percent after U.S. chemicals maker Platform Specialty Products Corp said it would buy the British company for about 1.35 billion pounds ($2.09 billion) in cash to expand its portfolio and reduce costs.
International Personal Finance dropped 25.2 percent, the biggest decline on the STOXX Europe 600, after a proposed change in a Polish law that could hit the company’s results. ($1 = 0.9057 euros)