European shares closed the day in positive territory on Wednesday as British Prime Minister Theresa May's resounding defeat in a parliamentary vote on her Brexit deal gave a boost to continental banks.
Analysts and investors interpreted the outcome as a positive for the market, making a "softer, later" Brexit more likely despite the uncertainty ahead of a no confidence vote in May's government later on Wednesday.
The Euro Stoxx finished the session up 0.5%, with most indexes on the continent in the black while London's FTSE lagged, down 0.5%, as a firming pound weighed on multinational exporters which make the lion's share of their earnings in foreign currencies.
The FTSE 250, a benchmark for domestically exposed UK firms, rose 0.3% with homebuilders and local retailers making big gains. Euro zone banks shares were the biggest boost to European indexes, rising 2.4% to their highest in over a month as investors bet that a disruptive no-deal Brexit was less likely after the parliamentary vote.
The rally in Italian banks, led by Unicredit up over 10%, helped Milan's FTSE MIB outperform peers with a 1.6% rise. Some analysts cautioned however that the new found optimism might be short-lived.
"Unfortunately, everything remains possible: new elections, an extension of the deadline for Article 50, or even a second referendum," said Stefan Kreuzkamp, chief investment officer at DWS.
In Germany, Deutsche Bank shares spiked higher in afternoon trading after a Bloomberg report said regulators would prefer the German lender to merge with a European rival rather than local competitor Commerzbank.
Shares in Deutsche Bank, which hit their lowest level on record last month, were up 8.4% while Commerzbank share also rallied 7.4%. Elsewhere in Europe results and dealmaking news drove moves, with stocks shrugging off the night's political developments. Danish freight company DSV climbed 5.8% after it made a bid for Swiss logistics company Panalpina valuing the company at $4.1 billion.
Panalpina shares soared 27.7% after the bid which, at 170 Swiss francs per share, represents a 24% premium to the stock's closing price on Tuesday. "We can see the strategic logic for DSV, as the deal would give them a large opportunity to scale their process and IT capabilities. But a deal of this magnitude will not be without risk," wrote Bernstein transport analyst Daniel Roeska.
Norwegian aluminum maker Norsk Hydro rose 5.2% after it said Brazil's northern state of Para lifted a production embargo on its Alunorte alumina refinery. (Reuters)