Tsipras, who made his offer after Greece became the first advanced economy to default on an IMF loan, said the country would want to delay some of the pension changes and cuts to military spending proposed by the creditors.
European shares .FTEU3 rallied to stand 1.8 percent higher, U.S. stocks futures rose ESc1 and southern euro zone bond yields all fell. GVD.EU
The euro also briefly perked up though it was quick to retreat again and was hovering just above $1.11 and at 0.71 sterling EURGBP=D4.
"There is hope that there could still be some talks over the next couple of days and things do not lead to a complete standstill," said Gerhard Schwarz, head of equity strategy at Baader Bank in Munich.
While an unwelcome milestone for Athens, the IMF default had also come as no surprise to markets after weeks of debt-talk brinkmanship. News that the bloc's finance ministers were to hold another teleconference later on Wednesday showed the drama was far from over.
German Finance Minister Wolfgang Schaeuble said there was no basis to have serious negotiations with Greece at the moment and that Tsipras' new offer had brought "no further clarity."
Nevertheless, stocks in London .FTSE, Paris .FCHI and Frankfurt .GDAX as well as Italy .FTMIB, Spain .IBEX and Portugal .PSI20 were up 1.5 to 2.6 higher, with euro zone bank stocks .SX7E up more than 3 percent .
There was plenty of uncertainty though. Greece was still in theory on course for a referendum at the weekend on whether to accept the demands from the euro zone and IMF for more swinging spending cuts.
Arguably the biggest focus of the day was whether the European Central Bank would begin cutting the emergency funding it is providing to Greek banks following the missed payment to the IMF.
"It is very difficult to see how one could conclude that banks that are basically closed because they have no access to cash, operating under a government that has just defaulted to the IMF, could possibly be solvent," said Gary Jenkins, chief credit analyst at LNG Capital.
"So it really becomes a political decision as to whether the ECB sticks to its rules or decides to keep everything as it is."
With the feeling that the ECB would not want to deliver the fatal blow to Greece and investors still harboring hopes of a deal at some stage, Italy, Spain, Portugal and Ireland -- the other high-debt countries that were in the crosshairs of the euro zone crisis a few years ago -- saw their bonds hold firm. ES10YT=TWEB IT10YT=TWEB PT10YT=TWEB.
CHINA ROLLER COASTER
There had been a flurry of European economic data too.
France's manufacturing sector grew in June for the first time since early 2014 while the equivalent data from Spain and Italy dipped as factory growth remained tepid in the euro zone overall.
Underlining Greece's woes, manufacturing activity there shrank for the 10th month in a row, as export orders and production slumped anew.
"The accelerated contraction in goods production in June ended the worst quarter for the Greek manufacturing sector for two years," said data complier Markit economist Phil Smith.
Despite all the Greek drama, currency markets were relatively rangebound.
The U.S. dollar index was up 0.4 percent at 95.833, having bounced from Tuesday's low of 94.847. Against the yen, the dollar stood at 122.89 JPY=, up from a five-week low of 121.93 plumbed on Tuesday.
Asia had been generally calmer overnight too after two days of wild swings.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS bounced 0.6 percent. Malaysian shares .KLSE rallied 1.8 percent after Fitch unexpectedly raised the country's outlook to "stable".
Japan's Nikkei .N225 added 0.4 percent, a second day of modest gains as it stabilized after Monday's steep fall.
There was unexpectedly upbeat news from the Bank of Japan's latest survey of manufacturers which improved in the three months to June, supporting the bank's view that growth is gathering momentum.
Chinese shares .CSI300.SSEC went on another roller coaster ride. They had looked like they had recovered from another erratic start before a late plunge left them down 5 percent in their fourth fall in the last five sessions.
Data was mixed from China where surveys showed sluggish factory activity but a pick-up in the service sector, a sign the transition to a more consumer-led economy remained on track.
Beijing's efforts to stem recent market selling are struggling to gain traction. A combination of cuts in interest rates, allowing local government pension funds to buy stocks and talk of behind-the-scenes "window guidance" to institutional investors, has yet to calm a skittish mood.
In commodities, safe-haven gold nudged up while oil fell after bouncing strongly on Tuesday to end the second quarter with hefty gains. Brent LCOc1 was quoted down 55 cents at $62.84 a barrel, while U.S. crude CLc1 eased 89 cents to $58.57.
(editing by John Stonestreet)
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