By Simon Kennedy, MarketWatch
LONDON (MarketWatch) — European equity markets moved higher Tuesday, led by sharp gains for many U.K. stocks as the London market reopened after a public holiday.
The Stoxx Europe 600 index (ST:STOXX600 281.45, +3.43, +1.23%) rallied 1% to 280.87, extending the gains it made on the first trading day of 2011.
Gains for banks helped lift the U.K.’s FTSE 100 index (UK:UKX 6,045, +145.00, +2.46%) 2.3% to 5,035.83.
U.S. stock futures also pointed to a strong start for Wall Street Tuesday after upbeat reports on manufacturing and construction activity helped drive U.S. markets to two-year highs in the previous session.
Stephen Pope, managing partner at Spotlight Ideas, said he expects the U.S. economy to “surprise to the upside” in 2011, but that economic growth in the developed world will remain moderate compared to emerging markets.
With the likes of China and India set to drive growth, Pope highlighted the energy, infrastructure and metal/mining sectors as among his top picks for the year.
“This will, in my opinion, be another strong year for equities, with 10% gains being made on the major developed markets,” he noted.
Mining stocks rose Tuesday — with Xstrata PLC (UK:XTA 1,564, +58.00, +3.85%) surging 4.1%, while bank stocks were also among the strongest performers.
Royal Bank of Scotland Group PLC (UK:RBS 40.92, +1.85, +4.74%) (RBS 12.57, +0.25, +2.03%) advanced 5% after it was upgraded to outperform from neutral at Exane BNP Paribas, which said worries over the impact of Ireland’s debt crisis have been overdone.
Other U.K. banks also got a lift as they caught up with gains made by European rivals on Monday. Barclays PLC (UK:BARC 271.35, +9.70, +3.71%) (BCS 17.06, +0.29, +1.73%) rose 3.5% and Lloyds Banking Group (UK:LLOY 68.38, +2.68, +4.08%) (LYG 4.24, +0.07, +1.68%) added 3.7%.
Among the other major indexes, the French CAC 40 (FR:PX1 3,942, +41.21, +1.06%) climbed 0.7% to 3,927.12 and the German DAX 30 (DX:DAX 7,016, +26.25, +0.38%) edged up 0.3% to 7,008.75.
Among the peripheral markets, Ireland’s ISEQ rose 1.1% to 2,917.66 and Portugal’s PSi 20 index was up 0.6%.
The Greek ASE Composite, however, dropped 1.8% as shares in Piraeus Bank weighed on the market. The lender slumped over 15% in Athens after it announced plans to raise over 800 million euros by selling new shares at a steep 43% discount to their recent price.
In other markets, Italy’s Fiat SpA (IT:F 7.32, +0.30, +4.20%) was a strong performer, rising 3.2% as Morgan Stanley initiated coverage of the firm with an overweight rating a day after it began to trade separately from Fiat Industrial SpA (IT:FI 8.98, -0.02, -0.22%) (IT:FI 8.98, -0.02, -0.22%)
Shares in Fiat Industrial, which the broker rated at equal-weight, were up 0.2%.
Other auto firms were mixed, with BMW (DE:BMW 61.00, -0.31, -0.51%) dropping 0.6% as the stock gave back some of the previous session’s strong gains.
Europe’s oil majors were also higher Tuesday, led by a 4.8% gain for BP PLC (UK:BP. 491.75, +26.20, +5.63%) (BP 46.06, +0.91, +2.02%) after the Daily Mail newspaper reported that rival Royal Dutch Shell (UK:RDSA 2,171, +32.50, +1.52%) (RDS.A 67.08, +0.30, +0.45%) had weighed a takeover bid in the wake of the Gulf of Mexico oil spill. (BP 46.06, +0.91, +2.02%) Shares in Shell rose 1.1%, while Total (FR:FP 41.68, +1.09, +2.67%) rose 1.9% in Paris.
The gains also came as crude-oil prices ticked slightly higher, and as The Wall Street Journal reported that energy firms may soon be able to resume drilling in deep water in the Gulf of Mexico, according to a plan announced Monday by the Obama administration.
Among other stocks in focus, shares in French retail giant Carrefour (FR:CA 32.84, +0.79, +2.47%) rose 2.7% after it was upgraded to buy from hold at Bank of America Merrill Lynch, which said a recent sell-off in the stock was overdone.
Other supermarket chains also had a good session, with Germany’s Metro AG (DE:MEO 55.91, +0.93, +1.69%) up 1.9% and Tesco PLC (UK:TSCO 433.95, +8.95, +2.11%) rising 2.1% in London.
