Europe lower as hopes of last-minute Greece deal raised



European equities closed in the red Tuesday as Greece remained firmly in the spotlight for investors.

The embattled country looks likely to default on a 1.6-billion-euro ($1.7 billion) debt payment due to the International Monetary Fund (IMF) later in the day, while its international bailout is due to expire at midnight.

Read More Greece lifelines runout as IMF payment looms

The pan-European Stoxx 600 (^STOXX) extended losses to close around 1 percent lower following unconfirmed reports in the Greek media that the country was set to return to the negotiating table with creditors.

The U.K.’s FTSE 100 (FTSE International: .FTSEE) fell over 1 percent, despite U.K. economic growth for the first quarter being revised upwards. The Office of National Statistics reported on Tuesday that the economy grew 0.4 percent in the first quarter.

Germany’s DAX (^GDAXI), France’s CAC (Euronext Paris: .FCHI) both closed in the region of 1 percent lower, having spent most of the session hanging onto gains.

Europe’s banking stocks were among the top performers, after clocking losses over the previous session. Italy’s Banca Popolare di Milano (Milan Stock Exchange: PMI-IT) and Unicredit (Milan Stock Exchange: UCG’S-IT) were both trading up around 2.5 percent. Greek stock markets remained closed on Tuesday due to capital controls.

Meanwhile, the U.K.’s Home Retail (London Stock Exchange: HOME-GB) was trading over 3.5 percent higher after Morgan Stanley upgraded its rating on the stock.

Across the Atlantic, U.S. stocks opened higher on Tuesday, attempting to bounce from the worst trading day of the year, as investors turned more optimistic on the Greece crisis.

The Dow Jones industrial average quickly added more than 100 points in the open on Tuesday, which marks the end of the second quarter and first half of the year.

Stocks had their worst day for the year so far on Monday, with the Nasdaq (^NDX) plunging 2.4 percent, the Dow Jones industrial (Dow Jones Global Indexes: .DJI) average closing below its 200-day moving average and the S&P 500 (^GSPC) barely above its average.

After the market close in Europe on Monday, Standard & Poor’s ratings agency cut Greece’s credit rating deeper into junk territory, while speculating the chances of a Greek exit from the euro zone us around 50 percent.

Greece will not make the payment to the IMF on Tuesday, according to a Greek official cited by Reuters. Greece’s existing bailout program also expires on Tuesday.

The failure to pay the IMF was widely expected following the collapse of talks between Greece and its international lenders at the weekend. Had talks over reforms succeeded, Greece could have received a last tranche of aid, which it could have used to pay some of its debts.

Instead, Greek Prime Minister Alexis Tsipras surprised lenders at the weekend by calling a snap referendum on Greece’s bailout program and austerity measures. The vote is on July 5.

Lenders refused to extend Greece’s bailout program until after the vote, prompting anger from Tsipras who is urging the Greek public to vote “no” to more austerity.

The Greek government on Tuesday proposed a new, two-year bailout deal with the European Stability Mechanism. This would be to “fully cover its financing needs and the simultaneous restructuring of debt,” according to a translated press release from the office of the Greek Prime Minister.

Jeroen Dijsselbloem, the president of the Eurogroup, subsequently tweeted on Tuesday that there would be a teleconference to discuss an “official request” from the Greek government “received this afternoon” at 8 p.m. GMT.

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