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LONDON (Alliance News) - Stocks in London and Europe are trading broadly higher midday Wednesday on fresh hopes for a deal between Greece and its creditors after Greek Prime Minister Alexis Tsipras said in a letter that he will accept the proposed bailout conditions with some changes.

He was set at midday to make an address to the nation shortly.

Officials from Greece and the EU confirmed that the Greek government sent a new proposal on its bailout accompanied by a letter from Tsipras to the country's creditors.

The Greek official emphasized that the government has "not fully accepted the proposal of the institutions" overseeing the country's bailout - the European Commission, the European Central Bank and the International Monetary Fund. "The Greek government has submitted a new proposal with a number of amendments to the text of the institutions, as it has done in recent weeks in an effort to find a mutually beneficial agreement."

The source added that the government's new proposal calls for a new agreement to regulate financing issues through the European Stability Mechanism, "in order to make debt sustainable and to emphasize the growth perspective".

However, German Finance Minister Wolfgang Schaeuble rejected new proposals from Athens, saying any new rescue programme would be based on a fresh set of conditions. Schaeuble said Athens' second bailout and the offer from its creditors had expired on Tuesday and that conditions for any new programme would be "rather different".

The exchange comes ahead of another eurogroup meeting to talk about Greece on Wednesday, which has been re-scheduled at 1630 BST.

Holger Schmieding, chief economist at Berenberg is sceptical whether a deal can be brokered, noting that the upcoming Greek referendum could cause difficulty in negotiations.

"The referendum idea has taken on a dynamic of its own. We cannot rule out that Europe – exasperated by the current Greek government - may now demand that the Greek people settle the issue in a referendum, and that Tsipras campaigns for a 'yes' to the conditions against which he first called the referendum," Schmieding says.

"A deal at this stage may require political change in Athens. As Syriza's left wing is unlikely to ever approve any 'memorandum' with creditors, Greece would probably need a new formal (or informal) coalition of moderate Syriza members with the pro-European parties before Europe could strike a deal," he adds.

The FTSE 100 trades up 1.4% at 6,613.16, the FTSE 250 is up 1.0% at 17,712.95, and the AIM All-Share is up 0.8% at 761.98.

European stocks are outperforming London, with the CAC 40 in Paris up 2.6%, and the DAX 30 in Frankfurt up 2.3%.

US futures are pointing to a higher open on the back of the optimism seen in Europe for a Greek deal and ahead of a raft of domestic economic data. The DJIA and S&P 500 are both indicated up 0.9% and the Nasdaq 100 is expected to open 1.0% higher.

Away from Greece, the pound fell sharply after the pace of growth in the UK manufacturing sector unexpectedly slowed to its weakest in 26 months due to moderation of growth in production and new orders, according to data from Markit.

The seasonally adjusted Markit/CIPS Purchasing Manager's Index dropped to 51.4 in June from 51.9 in May, which was revised from 52. Economists had expected an improvement in the index to 52.5. A PMI reading above 50 suggests expansion in the sector.

At midday the pound trades the dollar at USD1.5650 and the euro at EUR1.4079.

The independent Airports Commission on gave its backing to the expansion of Heathrow airport after concluding that the move would deliver the most economic benefits to the UK. The report said the third runway at Heathrow, the most expensive and the most politically controversial of the three options tabled to expand airport capacity in Britain, would generate up to GBP147 billion for the economy over 60 years and create 70,000 new jobs by 2050.

Ryanair Holdings immediately issued a statement in response saying the proposal doesn't go far enough and won't solve problem of restricted airport capacity in the South East.

Budget airlines easyJet and Ryanair are trading higher, are both up 3.4%, while travel operator TUI Group is up 3.2% and British Airways-owner International Consolidated Airlines Group shares up 2.0%

In the FTSE 250, Serco Group is up 10% after the outsourcer said trading in the first half of 2015 has been slightly better than anticipated, though it maintained its expectations for the full year and still forecasts a fall in revenue and flat trading profit in the half-year period. Shore Capital and Liberum both retain a Hold stance on the company, agreeing that Serco Group is trading "a little better".

Betfair Group is up 4.1% after Morgan Stanley lifted the bookmaker's price target to 3,000 pence from 2,030p, keeping an Overweight stance. The company currently trades at 2,505.00p.

Sirius Minerals is the best performer in the AIM-All Share index trading up 63%. The North York Moors National Park Authority late Tuesday gave the green light for Sirius Minerals to build the world's largest potash mine in the Yorkshire park near Whitby. Sirius Minerals shares resumed trading Wednesday after the Park Authority held a special committee meeting Tuesday to deliberate on Sirius's application to build a potash mine under the North York Moors National Park, which has now been approved.

Kennedy Ventures trades up 37% after it said it completed a long-term offtake deal between its African Tantalum subsidiary and a leading electronic components manufacturer. The unnamed manufacturer has agreed to take the full production from the African Tantalum Tantalite Valley Mine in Namibia, with prices in line with current market levels, Kennedy said.

LightwaveRF, down 22%, revealed that "constrained" revenue is holding back the company's financial performance for the full financial year, and is now expected to be similar to that of last year. The company said that while it continues to make progress with customer relationships and its sales proposition, the developments and modifications it has having to make to enhance product capability is holding back revenue in the short term.

Still ahead in the economic calendar, US ADP employment change is due at 1315 BST, ISM manufacturing PMI is at 1500 BST and EIA crude oil stocks at 1530 BST

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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