LONDON (ShareCast) - European stocks ended in the red but off earlier lows on Wednesday, as investors digested news that international creditors have rejected Greece's reform proposals.
According to media reports citing a Greek government official, prime minister Alexis Tsipras told associates that the measures he put forward in an attempt to unlock much-needed funds have been rejected.

The benchmark Europe Stoxx 600 index closed down 0.46%, Germany's DAX ended off 0.61% and France's CAC ended down 0.21%, having opened fairly flat and then dropped sharply on the reports.

In the periphery, Greece's ASE Composite ended the day down 1.77%, Spain's IBEX 35 closed off 0.79% and Italy's FTSE Mib ended 0.61% lower.

With Greece and its creditors still divided over the measures that Athens must put in place in order to receive bailout aid, the Greek PM took to Twitter to voice his opinion.

"The repeated rejection of equivalent measures by certain institutions never occurred before - neither in Ireland nor Portugal," said Tsipras.

"This odd stance seems to indicate that either there is no interest in an agreement or that special interests are being backed," he added.

Tsipras is due to meet in Brussels later on Wednesday with European Union Commission president Jean-Claude Juncker, International Monetary Fund head Christine Lagarde and European Central Bank president Mario Draghi.

Should the meeting fail to yield a deal, investors will look to a summit of European leaders on Thursday and Friday as the last chance for an agreement to be reached.

Although the general tone in markets was downbeat, CMC Markets analyst Jasper Lawler pointed out that "the reaction to the downside in stocks has been a lot more tempered than the rally seen over the past two days."

"The markets are showing a bit more of a propensity to melt up than melt down.

"This likely reflects an idea that Greece has turned a corner in its negotiation tactics," he added.

"Greece's PM Tsipras has shown more of a willingness to give in on some of the 'red lines' like taxes, so the institutions are pushing for all they can get in the last days before the June 30 payment deadline."

Wednesday data

Although the focus was on Greece, investors also had some data to sift through on either side of the Pond.

The headline business climate index from the IFO institute in Germany dropped to 107.4 this month from 108.5 in May, falling short of analysts' expectations for a smaller decline to 108.1.

In the US, the final release of first-quarter gross domestic product printed in line with expectations, showing a 0.2% contraction, versus 0.7% contraction in the previous estimate.

British retailers surge on upgrades

In corporate news, supermarket retailers Ahold and Delhaize announced that they have agreed to merge in a deal that will create one of the largest supermarkets in the US. Altice shares rose on the news, but Delhaize fell.

Elsewhere, Bouygues plunged after saying it has rejected Altice's bid for Bouygues Telecom.

It was a brighter picture in London, however, where broker notes lifted retailers.

Sainsbury was in the black after Societe Generale upgraded the stock to 'buy' from 'hold', pointing to a resilient profile and an attractive valuation. Peers followed suit, with Wm Morrison and Tesco both on the front foot.

Clothing retailer Next also gained after Barclays upgraded it to 'overweight' from 'equalweight', highlighting growth opportunities in Retail and Directory.

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