European shares rose on Wednesday, adding to strong gains in the previous session, after strong economic data on both sides of the Atlantic boosted investor confidence, and with euro zone banks rising ahead of the European Central Bank's loan offer.
At 9:53 a.m., the FTSEurofirst 300 <.FTEU3> index of top European shares was up 0.7 percent at 983.27 points, after rising 2 percent on Tuesday, following a successful Spanish debt auction, and signs of improved economic prospects in Germany.
If this recent positive trend in the data continues, it could drive the market higher, said Daniel McCormack, strategist at Macquarie.
We've had some better news in terms of the economic cycle. Housing data is important, as it's a leading indicator of the U.S. economy.
Banks extended recent gains, with the STOXX Europe 600 Euro Zone Banking Index <.SX7E> up 1.7 percent. France's BNP Paribas
Many banks are expected to take advantage of the European Central Bank's first ever offer of three-year loans on Wednesday, which may ease fears of an impending credit crunch and bolster bond and money markets.
Some banks are expected to use the funds to buy sovereign debt. Sovereign bond yields have fallen since the ECB announced the move earlier this month, boosting the value of bonds in banks' portfolios.
The ECB will publish the results of the tender at 10:15 a.m. Traders polled by Reuters just hours before the operation expected the ECB to allot 310 billion euros, up from a forecast of 250 billion euros in a poll on Monday.
This is undoubtedly the key event of today. The market has got itself into a rare old state of excitement about it, said Jeremy Batstone-Carr, strategist at Charles Stanley.
The jury is out on what this means and what the take-up will be. It could be argued that the more banks reveal their exposure the more they reveal their potential vulnerability.
U.S. stocks rallied nearly 3 percent on Tuesday as U.S. housing data beat forecasts and Federal Reserve capital proposals for banks proved less onerous than some had feared.
But European tech companies fell after earnings from U.S. major Oracle
Oracle's shares traded in Frankfurt
The FTSEurofirst 300 <.FTEU3> index of leading European shares has lost more than 12 percent in 2011, hurt by the euro zone crisis.
Batstone-Carr said it would fall further in the first quarter of 2012. We have a strong suspicion the euro zone is already in recession, he said.
(Additional reporting by Blaise Robinson; Editing by Mike Nesbit)