The STOXX Europe 600 Banking Index rose 2.8 percent.

At 0709 GMT, the FTSEurofirst 300 index of top

European shares was up 1.8 percent at 903.73 points, after falling 2.7 percent on Tuesday.

"This rally may not last. Lots of stocks look cheap. We need a strategy for resolving the sovereign debt crisis in the euro zone We need s strategy to get on top of the US debt problem," Jeremy Batstone-Carr, strategist at Charles Stanley, said.

"Until we get answers, the market can stay cheap. Economic authorities in Europe have continually failed to come up with a robust policy. Now they're in the last chance saloon. "

European finance ministers agreed on Tuesday to safeguard their banks as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead. Hours earlier French-Belgian municipal lender Dexia became the first European bank to have to be bailed out due to the euro zone's sovereign debt crisis.