MADRID (MarketWatch) — European equity markets rallied Wednesday after three days of losses, with Greek stocks surging 8% after a favorable ruling by Germany’s Federal Constitutional Court.

By the close of European trade, U.S. stocks were sharply higher on news reports that President Barack Obama will propose a $300 billion package to boost jobs in a speech to Congress on Thursday.

The Stoxx Europe 600 index (SXXP)(SXXP) rose 3.1% to end at 228.84. The index fell Tuesday to the lowest closing level since July 29, 2009.

Greek stocks soared and German stocks also rose sharply Wednesday on news that a German court ruled against plaintiffs seeking to block bailouts of indebted euro-zone nations. The court said the government would have to get approval from the parliament‘s budget committee before participating in future bailouts.

Greece’s ASE Composite index (GD) surged 8% to 929.45, with National Bank of Greece SA NBG soaring nearly 23% and EFG Eurobank Ergasias SA jumping nearly 15%.

The German DAX 30 index (DAX) rallied 4.1% to 5,405.53, with BMW AG (BMW) up 6%, Daimler AG (DAI) up 5.9% and Commerzbank AG (CBK) up 5.8%.

Joshua Raymond, strategist at City Index, said markets were driven by some bargain-hunting. The German court ruling also provided support, he said.

The German court was not expected to rule against the government, but Raymond noted reports that the decision was tight. “That’s not going to help in the near term, particularly if you start to see more German apathy towards their involvement and support of euro-zone bailouts,” he said.

Raymond said Wednesday’s rally may not have strong legs.

“Sentiment has not suddenly changed overnight,” he said. “There’s a lot of volatility. We’ll have to get used to 2% to 3% swings on a daily basis.”

Auto stocks, resources gain

Beaten-down Italian banks also got boosted, with UniCredit SpA (UCG) up 5%. Italy’s FTSE MIB index (FTSEMIB) rose 4.2% to 14,645.96, also helped by gains for auto maker Fiat SpA (F) , up 8.6%.

France’s CAC 40 index (PX1) also got a lift from auto-related stocks, with Renault SA (RNO) up 7.4% and tire maker Michelin (ML) up 5.3%. The CAC gained 3.6% to 3,073.18.

Hotel group Accor SA (AC) gained 5.3% after UBS raised its rating to neutral from sell, saying share prices now reflect a more sluggish global growth scenario.

Goldman probe widens

Shares of oil major Total SA (FP) TOT, +2.91% rallied 3.7%, as crude-oil futures rose.

Away from the main French index, shares of Air France-KLM (AF) soared 6% after the airline said August passenger traffic rose 7.6% from a year earlier, while its load factor gained 1.2 points to 85.7%.

In London, BP PLC (BP.) rose 4% and Royal Dutch Shell PLC RDS.A, -1.87% (RDSA) gained 3.5%.

Gold futures fell sharply, as renewed appetite for stocks drew investors away from perceived safe havens such as gold. Gold miner Randgold Resources Ltd. (RRS) fell 2.3%.

Other mining stocks rose, with shares of Antofagasta PLC (ANTO) up 6.8% and BHP Billiton PLC (BLT) BHP, +0.21% gaining 4.8%.

Bank gains were also driving the FTSE 100 index (UKX) higher, as Lloyds Banking Group PLC (LLOY) rose 6.4% and Royal Bank of Scotland Group PLC RBS, -2.42% (RBS) jumped 6.1%.

The FTSE 100 rose 3.1% to 5,318.59.

Swiss stocks continued to benefit from the ceiling put on the value of the Swiss franc versus the euro. A soaring franc has weighed on export-oriented companies in Switzerland.

The SMI index (SMI) rose 2.5% to 5,501.26. Shares of Swiss banking software group Temenos Group AG (TEMN) jumped nearly 11%. Morgan Stanley analysts said in a note that they recently met Temenos Chief Executive Guy Dubois and were impressed with his deep industry experience. The group’s pipeline remains solid and underpins guidance, they noted.

Meanwhile, shares of luxury-goods group Compagnie Financiere Richemont SA (CFR) rallied 7.3% after the company posted a 35% rise in five-month sales to the end of August, at constant exchange rates. At actual exchange rates, sales rose 29%.

Executive Chairman Johann Rupert said a continuation of “current good trading levels” may be difficult to achieve in the next six months, while a strong Swiss franc will challenge exporters.