By Steve Goldstein
European stocks recovered on Tuesday much of what they lost in the prior session, with the broader market in a holding pattern as traders awaited news from the U.S. Federal Reserve on whether it will signal an exit strategy from loose monetary policy.
The pan-European Dow Jones Stoxx 600 index rose 0.6% to 244.47 -- just below Friday's close of 244.92 -- with investors picking up auto makers like Peugeot /zigman2/quotes/203546414/delayed FR:UG -4.21% , which rose 1.8%, and resource extractors like diversified miner Rio Tinto /zigman2/quotes/208934945/delayed UK:RIO -2.19% , which added 2.4% after reaching a deal to sell its Alcan Composites business for $349 million.
Schweitzer, which bought the business from Rio Tinto, climbed 13.4% in Zurich.
The German DAX Xetra rose 0.7% to 5709.38, the U.K. FTSE 100 index edged up 0.2% to 5142.60 and the French CAC 40 index climbed 0.3% to 3823.52.
The dollar, which has moved in the opposite direction to most other asset classes of late, weakened against the euro, the British pound and the yen. The Fed's decision is due on Wednesday.
The euro rose as high as $1.4820, the first time the shared currency has topped $1.48 this year.
Mervyn Douglas, who runs the U.K. Focus Fund at Aviva Investors, said he prefers equities to cash and government bonds. But he also said the market is nearing an end to the phase where early-stage cyclicals outperformed.
"We prefer higher-quality long-term franchises which haven't performed relatively well," said Douglas, citing medical-equipment maker Smith & Nephew and consumer-products group Reckitt Benckiser as examples.
One of his concerns is that strategists are bringing GDP and earnings forecasts higher but not moving up interest-rate-increase expectations. "So far it's a perfect Goldilocks world, but I don't think that's sustainable."
Among stocks in the spotlight, Carnival /zigman2/quotes/210414141/delayed UK:CCL -4.25% rose 5% after the cruise ship operator posted a 19.5% drop in quarterly profit, but still beat market expectations and lifted its profit forecast for the year.
Ahead of the results, Merrill Lynch also added Carnival to its Europe 1 list, saying it sees "significant opportunities for net revenue yield improvement from current depressed levels and believes the company offers an attractively priced way of playing a U.S.-led consumer recovery."
Merrill has a £23.90 target on the U.K.-listed Carnival shares and a $38 target on the U.S.-listed shares.
Rival Royal Caribbean added 1.6% in Oslo.
French hotel operator Accor /zigman2/quotes/203800565/delayed FR:AC -1.35% rose 3.2% after reaching a sale-and- leaseback transaction on 158 hotels under its hotelF1 brand. Accor said that it will receive €272 million ($399.2 million) from a consortium of French institutional investors and that it has signed a 12-year business lease, renewable six times at Accor's option.
Accor said the deal will enable it to reduce its adjusted net debt by €187 million in 2009 and will lift pretax profit by about €5 million.
Water utilities struggled, with United Utilities /zigman2/quotes/203908003/delayed UK:UU -0.93% and Severn Trent each retreating.
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