By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets posted solid gains on Tuesday, after better-than-expected confidence and housing data from the U.S. fueled optimism about the economic recovery.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +1.42% climbed 1.3% to close at 308.23, adding to a 0.3% gain from Monday.
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The index was flirting with an almost five-year high reached last week, before worries that the U.S. Federal Reserve would soon begin to taper its aggressive bond-purchases program sent markets lower toward the end of the week.
Ultra-loose easing policies from central banks globally have helped markets climb to multiyear highs, with Europe’s benchmark looking at a 10% year-to-date gain and U.S. indexes up more than 15% for the period.
The rally could, however, soon come to an end, as investors search for another catalyst to drive markets higher, according to Richard Perry, chief market strategist at Central Markets.
“The earnings season is coming to an end and that has been a fairly decent driver in the States, and even if it wasn’t outstanding, it had the ability to push markets higher. Without that, markets will be looking elsewhere for a catalyst and they might not like what they see,” he said.
“It’s very interesting to see if the focus moves back to China—with PMI data coming out over the weekend—and euro-zone data in general,” he added.
Among notable movers in the euro zone, shares of GlaxoSmithKline PLC /zigman2/quotes/200381158/delayed UK:GSK -1.17% /zigman2/quotes/209463850/composite GSK -0.99% gained 1.9%, after Deutsche Bank lifted the drug maker to buy from hold, saying upcoming regulatory decisions are likely to be positive and that the pipeline looks promising.
Another drug maker, AstraZeneca PLC /zigman2/quotes/203048482/delayed UK:AZN +0.32% /zigman2/quotes/200304487/composite AZN +0.67% , rose 2.7%, after saying it will buy Omthera Pharmaceuticals Inc. for $12.70 per share, valuing the company at $323 million. Shares of Omthera soared 98% in the U.S. at the time of the European close.
Banks also posted some of the biggest advances, with shares of HSBC Holdings PLC /zigman2/quotes/203901799/delayed UK:HSBA +1.35% /zigman2/quotes/202687335/delayed HK:5 +1.46% up 2.4% in London, Banco Santander SA /zigman2/quotes/205677933/delayed ES:SAN +0.66% /zigman2/quotes/202859081/composite SAN +2.05% 3.1% higher in Madrid and BNP Paribas SA /zigman2/quotes/206351084/delayed FR:BNP +1.61% rising 2.1% in Paris.
MarketWatch/Tim Rostan
European investors were encouraged by strong data from the U.S. The S&P/Case-Shiller 20-city composite index showed home prices grew 10.9% in March compared with the same month last year, marking the highest annual growth rate since April 2006.
Additionally, the consumer-confidence index climbed to a five-year high of 76.2 in May, beating expectations of a 72.3 reading.
Data from the U.S. have lately been scrutinized by investors, after Federal Reserve Chairman Ben Bernanke last week said the central bank could start tapering its bond-purchase program if data continue to improve. Equities sold off after the comment, as worries that a reduction in the $85-billion-dollar-a-month asset purchases would create financial turmoil offset the outlook for better macroeconomic data.
Concerns that the European Central Bank could be considering fading out its stimulus strategies were soothed on Monday, after ECB Executive Board member Joerg Asmussen said the bank’s monetary policy will remain expansive as long as necessary .
U.S. stocks rallied on Wall Street. In Asia, most indexes closed higher, with Japanese exporters getting a lift from a weaker yen. The dollar /zigman2/quotes/210561789/realtime/sampled USDJPY -0.0354% bought ¥102.09, up from ¥101.09 late Monday.
Movers
Investors in the U.K. returned from a long weekend, with the FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.27% posting a 1.6% gain to 6,762.01.
Oil firms posted solid gains, tracking oil prices higher. BP PLC /zigman2/quotes/207305210/composite BP -0.34% added 1.3% and Royal Dutch Shell PLC gained 1.7%.
Miners, however, showed weakness after J.P. Morgan Cazenove slashed the outlook for most metals prices and cut the price targets of some of the U.K.’s largest mining firms. Shares of Eurasian Natural Resources Corp. dropped 2.7% and Anglo American PLC /zigman2/quotes/201381512/delayed UK:AAL +1.22% fell 1%.
France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +1.64% added 1.4% to 4,050.56, while Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +1.62% gained 1.2% to 8,480.87.
Shares of Bayer AG /zigman2/quotes/210533053/delayed DE:BAYN +0.98% added 2.2%, after Jefferies lifted the pharmaceutical firm to buy from hold.
Outside the major indexes, shares of Victrex PLC /zigman2/quotes/202943820/delayed UK:VCT +0.93% jumped 8.4%, after the films and coatings firm increased interim dividends by 15%.
Luxury-watch maker Cie. Financière Richemont SA /zigman2/quotes/203783259/delayed CH:CFR +9.55% gained 3%, after the Federation of the Swiss Watch Industry said watch exports rose 5.7% in April.
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