Investors snapped up heavily sold-off European equities on Thursday, betting that weak economic data could prompt stimulus from central banks, but with the Greek crisis still unresolved the rally was seen as short-lived.
Eurozone purchasing managers indices (PMIs) pointed to a deeper than expected slowing of activity in the private sector, while the German Ifo showed the possibility of a Greek euro exit knocking confidence in the region's strongest economy. Although gloomy in itself, the data raised expectations of equities-friendly action from the European Central Bank.
European players also played catch-up with U.S. markets, which staged a late-session comeback on Wednesday.
The FTSEurofirst 300 closed up 1.2 percent at 984.08 points, recouping roughly half of the previous session's drop and recovering from five-month lows of 964.66 set last week.
"In the short term the equity traders can chase the market for a day or two to the upside if they think the ECB is doing something ... However I would not make the conclusion that any bad news is sufficiently priced into equities, this is definitely not the case," said an equities strategist at a major European bank.
Underlining ongoing concerns, the Greek stock market steeply underperformed, dropping 4.5 percent to its lowest level in over two decades.
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