Oil, Stocks Surge on Oil Rally Hopes

European stocks, oil drive risk rally; Credit Agricole (XCA.F), Glencore (GLCNF) the big movers.

Oil and stocks jumped on Wednesday, as European earnings and hope that top oil producers will convince Iran to agree to a production freeze overcame initial caution in Europe.

Banks and resources stocks led the way, with French bank Credit Agricole soaring 12 percent after publishing its latest results and UK-listed miner Glencore up 10 percent after announcing the refinancing of its debt.

Investors' appetite for risk eventually seeped through to currencies and fixed income markets, where safe-haven assets like the Japanese yen and government bonds gave back their initial gains, and gold also eased back from its earlier high.

"It's a correction in oil. The recovery may not last but it's giving a boost to stocks," said Ipek Ozkardeskaya, market strategist at London Capital Group.

"But these levels of price swings on both sides, up and down, is a bad sign. There's no clear visibility on direction. We're still in a world where investors aren't really sure where to put money," she said.

The pan-European FTSEurofirst 300 index of leading shares was last up 1.6 percent, bringing its gains for this week to 4 percent and putting it on track for its best week over in three months.

Financials were up 2 percent and basic resources stocks were up 4 percent.

Britain's FTSE was up 1.5 percent, Germany's DAX was up 1.7 percent and France's CAC 40 rose 2 percent.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.4 percent, reversing early gains of 0.4 percent, after a 3 percent rise over the previous two sessions.

The Shanghai Composite Index rose 1 percent and Japan's Nikkei fell 1.4 percent but is still up more than 5 percent on the week.

MSCI's index of world shares was up 0.2 percent, extending Tuesday's rise of 2.3 percent, its second-best gain in four years.

E-Mini futures for the S&P 500 rose 0.7 percent. The S&P 500 added 1.65 percent on Tuesday, the Dow ended up 1.39 percent and the Nasdaq up 2.27 percent.

CRUDE AWAKENING
Investors are closely watching how a proposal from top exporters Russia and Saudi Arabia to freeze output is greeted in Iran, which was absent from the talks and is determined to raise production.

Iranian Oil Minister Bijan Zanganeh is meeting his counterparts from Venezuela, Iraq and Qatar in Tehran on Wednesday. An Iranian official earlier said Iran would continue increasing its crude output until it reached levels seen before the imposition of international sanctions.

Oil recovered from early losses and in early European trade on Wednesday Brent was up 2.8 percent at $33.05. U.S. crude was up 1.9 percent at $29.58 a barrel.

Markets are also awaiting minutes of the Federal Reserve's last meeting to judge views of policymakers on the prospect of further rate hikes.

Boston Fed President Eric Rosengren sounded in no hurry to tighten. Speaking on Tuesday, Rosengren said the Fed would need to lower economic forecasts it made in December because of the uncertain global outlook.

Doubts about the pace of any further rate increases held back the U.S. dollar at 96.85 against a basket of currencies. It was flat against the yen at 114.05 yen, while the euro erased its earlier gains to trade flat on the day at $1.1145.

Sterling, which has struggled so far in 2016 because of worries Britain might leave the European Union, recovered after figures showed UK employment rose to its highest level ever and the claimant count for jobless claims hit a 40-year low.

On Thursday, Prime Minister David Cameron will try to persuade other leaders to support an agreement to keep Britain in the EU.

"We do not expect any further negative reaction to be hefty or long-lasting as investors are unlikely to remain too much positioned ahead of the start of the key EU summit tomorrow," wrote Unicredit currency strategists in a note on Wednesday.

Sterling was last flat on the day at $1.43, recovering around half a cent after the jobs data.

In bond markets the benchmark 10-year U.S. Treasury yield was up one basis point at 1.79 percent and the 10-year Bund yield was up a basis point too at 0.27 percent .

Gold was on track to snap a three-day losing streak, up 0.4 percent on the day at $1,205 an ounce but off its high.

Reporting by Jamie McGeever