By Carla Mozee, MarketWatch

Eurozone manufacturing, services activity expands

LONDON (MarketWatch) -- European stocks charged higher Tuesday, flirting with their highest close on record, as investors reacted to mergers-and-acquisition developments and economic data pointing to improvements in the economy, and as concerns eased about an interest-rate increase in the U.S.

The Stoxx Europe 600 climbed 1.6% to 404.34, getting nearer to its best closing level of 405.50.

Tuesday's broad-based gain was led by a more than 4% surge in oil and gas stocks as they caught up with a more than 6% rally in oil prices (http://www.marketwatch.com/story/oil-rebounds-as-iran-exports-seen-taking-months-to-ramp-up-2015-04-06)(CLK5) on Monday. That move came in part from fading concerns that a preliminary deal on Iran's nuclear program would lead Iranian oil flooding onto world markets. Oil prices on Tuesday turned higher.

The U.K.'s FTSE 100 (http://www.marketwatch.com/story/ftse-100-jumps-after-holiday-break-but-easyjet-iag-lag-2015-04-07), which is heavily weighted by oil stocks, rose by the most in two months, gaining 1.9% to 6,961.77. Meanwhile, Germany's DAX 30 rose 1.3% to 12,123.52.

Read: Oil prices to stay lower for longer, says Goldman Sachs (http://www.marketwatch.com/story/oil-prices-to-stay-lower-for-longer-says-goldman-sachs-2015-04-07)

Deal talk: TNT Express NV was in the spotlight Tuesday, with shares rising 28% as the Dutch logistics group agreed to be purchased (http://www.marketwatch.com/story/fedex-to-buy-tnt-express-for-48-billion-in-cash-2015-04-07) by FedEx Corp. (FDX) for about EUR4.4 billion ($4.8 billion) in cash, a move that will allow parcel delivery company FedEx to expand operations in Europe.

France's CAC 40 gained 1.5% to 5,151.19. In Paris, Vivendi SA shares climbed 1.2% as the media conglomerate confirmed it wants to buy Dailymotion (http://www.marketwatch.com/story/vivendi-confirms-interest-in-buying-oranges-dailymotion-2015-04-07), a video-streaming website run by French telecom Orange SA . Orange shares were up 1%.

European investors returned from the Easter holiday break to an overnight jump in U.S. stocks (http://www.marketwatch.com/story/us-stocks-futures-tumble-after-jobs-data-triggers-corporate-profit-worries-2015-04-06)(SPX) (DJI), helped by expectations the Federal Reserve will move more slowly in raising interest rates after a disappointing March jobs report. U.S. equity trading was closed Friday when the report was released. U.S. stocks (SPX) (DJI) were trading higher Tuesday.

New York Federal Reserve President William Dudley (http://www.marketwatch.com/story/feds-dudley-signals-go-slow-approach-to-rate-hike-2015-04-06) on Monday suggested the Fed won't raise interest rates at least until September. "A few more speeches in a similar tone by some other officials could further fuel up this speculative behavior," Naeem Aslam, chief market analyst at AvaTrade, said in an early Tuesday note, adding that the market may then "see some new capital commitment by investors."

European stocks also found support Tuesday after data firm Markit said that activity in the manufacturing and services sectors in the eurozone expanded by the fastest rate in nearly a year (http://www.marketwatch.com/story/eurozone-economy-grows-at-fastest-in-11-months-2015-04-07). Its composite purchasing managers index rose to 54.0 in March, up from 53.3 in February. Markit's initial estimate had the PMI rising to 54.1.

Spending power in households has been aided by cheaper oil prices, while "aggressive" easing measures enacted by the European Central Bank "has cut borrowing costs materially," wrote Berenberg senior economist Christian Schulz in a note. He also noted that more export-oriented sectors have benefited from a weaker euro.

"As the full effect of the new economic tailwinds is only beginning to unfold, further gains in momentum are likely," Schulz said. "The eurozone is headed for very solid GDP growth in the second half of the year, with some upside risk to our call for 1.4% GDP growth for the full year 2015."

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