* FTSEurofirst 300 up 0.8 percent, Athens’s ATG up 10.9 pct
* Germany’s DAX index hits record high
* Santander, BP rise after results
By Atul Prakash
LONDON, Feb 3 (Reuters) - European shares rose to near a seven-year high on Tuesday, and Greek banking stocks soared, on hopes a standoff over the country’s debt would be resolved after its new government softened calls for a writedown.
Athens proposed ending a standoff with its creditors by swapping the debt for growth-linked bonds. The reported proposals contrast with the government’s strident vows last week to ditch the tough austerity conditions imposed under its existing bailout.
Athens’ benchmark index ATG jumped 10.9 percent, with the country’s banking index surging more than 18.7 percent. National Bank of Greece, Alpha Bank and Eurobank rose by 14.0 to 20.8 percent.
“Greek banks have massive potential to recover because if you get a debt deal and Greek banks get some help, then they can reinforce their balance sheets and carry on trading,” Edmund Shing, global equity fund manager at BCS Asset Management, said.
Greek Finance Minister Yanis Varoufakis, in London on Monday to reassure private investors that he was not seeking a showdown with Brussels over a new debt agreement, said the new left-wing government would spare privately held bonds from losses, a source told Reuters.
However, German Chancellor Angela Merkel said Greece was still working out plans on tackling its debt and declined to comment on an apparent softening of Athens’ stance on a debt writedown and proposals for a new debt swap.
Shares in other southern European markets also outperformed, with Spain’s IBEX up 2.4 percent and Italy’s FTSE MIB up 2.1 percent. The FTSEurofirst 300 rose 0.8 percent to 1,479.23 points by 1435 GMT, not far from a seven-year high of 1,490.02 set in late January, while Germany’s DAX was up 0.8 pct after hitting a new record high.
“The market is currently hoping that Greek negotiations of (its) bailout terms will run quite smoothly. There are some signs that there might be a compromise in the making and there will not be any kind of default,” Gerhard Schwarz, head of equity strategy at Baader Bank in Munich, said.
Spain’s Santander, the euro zone’s biggest bank, featured among the top gainers, rising 4.1 percent, after reporting a nearly 70 percent jump in fourth-quarter profit. Its results were lifted by earnings from its lending business and as charges on soured loans fell.
Commodity stocks also rallied, supported by a sharp rise in metals and crude oil prices. The STOXX Europe 600 Oil and Gas index rose 3.1 percent, while the European basic resources index gained 3.2 percent.
Oil major BP rose 2.8 percent, having also beaten profit expectations for the fourth quarter. Although it took a $3.6 billion impairment charge and cut capital expenditure, it maintained its quarterly dividend. (Editing by John Stonestreet and Susan Fenton)