Europe close: Deutsche Bank leads bounce in banks

European stocks racked up solid gains on Wednesday, with banks surging ahead following heavy losses in the previous session and after the chair of the US Fed told Congressmen that financial conditions in the US had tightened and that weakness in economies overseas, in particular, posed risks to the US.

The benchmark DJ Stoxx Europe 600 index was up 1.97%, Germany’s DAX was up by 1.72% and France’s CAC 40 by another 1.59%.

Commenting on the speech by the head of the US central bank, Ian Sheperdson, chief economist at Pantheon Macroeconomics, said: "Fed Chair Yellen's Testimony does not close the door to a March rate hike, given that the meeting is still more than a month away, but if the committee loses its nerve in the face of continued market volatility, no-one will be able to say they are surprised. [...]

"The March decision will depend on the labor market data, which in all likelihood will signal the need for higher rates, and a host of market developments and non-labor data, which likely will not. We're sticking to our 55/45 call in favor of a March hike, but it will be close either way."

Banks were the standout gainers following a dismal performance on Tuesday, with the Stoxx 600 index for the sector finishing higher by 4.78%.

Deutsche Bank led the charge, bouncing back by 6.18% - although it surged by nearly 14% at one point in the session - on media reports the lender was considering a bond buyback. Shares in the bank slid on Tuesday despite assurances from its chief that its balance sheet was “rock solid”.

Energy markets were also stable, with West Texas Intermediate crude furtures were up by 0.07% at $27.96 a barrel and Brent crude was 2.54% higher to $31.18 a barrel.

It wasn't all good news, however, as investors sifted through a raft of disappointing earnings and the Japanese currency continued to strengthen.

Japan's Nikkei 225 equity benchmark surrendered another 2.31% overnight to 15,713 points while the dollar/yen lost 1.11% to 113.83.

Luxury brand Hermes was on the back foot after reporting a slowdown in 2015 sales growth.

Shares in Moller-Maersk tumbled after the Danish container shipping company said its underlying results for 2016 were likely to be significantly lower.

ARM Holdings, which designs chips for Apple, was also under the cosh after posting a rise in full year pre-tax profit and sales but noted a slowdown in the smartphone market.

Heineken nudged a touch lower after its full-year sales numbers came in just below analysts’ expectations, but Carlsberg rallied as its fourth quarter numbers surpassed estimates.

Akzo Nobel was in the red after the specialty chemicals company's fourth quarter earnings missed consensus views.