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European stocks rose in early trade on Wednesday following better-than-feared economic data from Germany and France, and as debt-stricken Greece appeared to be nearing a political consensus on painful budget cuts.

Banking stocks rallied, boosted by BNP Paribas's forecast-beating results and the fact it managed to hit tougher capital targets six months early.

BNP Paribas gained 4.9 percent, while Societe Generale was up 3.1 percent and UniCredit up 2.2 percent.

At 11:23 SA time, the FTSEurofirst 300 index of top European shares was up 0.6 percent at 1,075.71 points.

“The recent stabilisation of the market makes me think that it's time to take more risk, but by buying the best stories individually rather than whole indexes,” said David Thebault, head of quantitative sales trading at Global Equities.

“The big change in policy by the European Central Bank is really making a big difference here.”

The ECB ratcheted up its funding operations in December with its first offer of three-year money at rock-bottom interest rates of 1 percent, drawing demand of close to half a trillion euros and reviving appetite for risky assets such as equities.

Economists polled by Reuters expect a repeat tender over the same maturity at the end of this month to attract roughly the same volume of bids.

Data showed on Wednesday that Germany's gross domestic product (GDP) contracted 0.2 percent in the fourth quarter, better than economists had expected, while France's economy grew by a stronger-than-expected 0.2 percent, as corporate investment picked up and domestic consumption remain solid.

A Reuters poll of 36 economists had predicted on average a 0.1 percent contraction for France.

Figures for the whole euro zone are due at 12:00 SA time and forecasts signal a 0.3 percent drop quarter on quarter.

Around Europe, Britain's FTSE 100 index was up 0.3 percent, Germany's DAX up 1.1 percent, and France's CAC 40 up 0.9 percent.

The euro zone's blue chip Euro STOXX 50 index was up 0.9 percent at 2,510.55 points.

The index has gained about 15 percent over the past two months, helped by the ECB's action which has eased concerns over systemic risks stemming from the region's debt crisis.

“After testing the lower band of its upward channel, the Euro STOXX 50 should climb toward its highest point of 2012 at 2,540 points, its next resistance level,” Aurel BGC chartist Gerard Sagnier said.

The chartist's target for the index remains the zone around 2,615 points, which represents the completion of the 'wave 3' of the Elliott wave chart pattern.

The Elliott wave theory is used to spot repetitive patterns of waves in prices, based on the assumption that the market moves in a direction in a series of five waves and into the opposite direction in a series of three waves.

Investors' worries over Greece eased on Wednesday after sources said Greek conservative party leader Antonis Samaras was expected to deliver a letter of commitment to the country's international lenders.

Comments by China's central bank governor Zhou Xiaochuan that the country would keep investing in debt issued by euro-zone governments, also supported investor sentiment in Europe. - Reuters