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 climbed 1.3% to close at 308.23,
adding to a 0.3% gain from Monday.
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 (GSK) 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 (AZN), rose 2.7%, after
saying it will buy Omthera Pharmaceuticals Inc. (OMTH) 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 (HBC) up 2.4% in London, Banco Santander SA (SAN)
3.1% higher in Madrid and BNP Paribas SA rising 2.1% in Paris.
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 (USDJPY) bought Yen102.09, up from Yen101.09 late
Monday.
Movers
Investors in the U.K. returned from a long weekend, with the
FTSE 100 index posting a 1.6% gain to 6,762.01.
Oil firms posted solid gains, tracking oil prices higher. BP PLC
(BP) added 1.3% and Royal Dutch Shell PLC (RDSB) 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 fell 1%.
France's CAC 40 index added 1.4% to 4,050.56, while Germany's
DAX 30 index gained 1.2% to 8,480.87.
Shares of Bayer AG added 2.2%, after Jefferies lifted the
pharmaceutical firm to buy from hold.
Outside the major indexes, shares of Victrex PLC jumped 8.4%,
after the films and coatings firm increased interim dividends by
15%.
Luxury-watch maker Cie. Financière Richemont SA gained 3%, after
the Federation of the Swiss Watch Industry said watch exports rose
5.7% in April.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires