European shares closed at their highest level in more than two years on Tuesday, boosted by fresh corporate earnings reports and improved hopes that the global economic recovery is sustainable. The pan-European FTSEurofirst 300 index of top shares closed up 0.6 percent at 1,117.24 points, its highest close since September 2008.
"European markets are holding up following on from last week's positive news on US quantitative easing and valuations are still at acceptable levels," Lothar Mentel, chief investment officer at Octopus Investments, said. The STOXX Europe 600 index prices the one-year forward forecast earnings of its constituency at about 10.7 times against a 10-year average of 13.43, Thomson Reuters Datastream showed.
Gold miners Petropavlovsk and Randgold Resources jumped 8.3 percent and 4.6 percent, while copper miner Kazakhmys rose 3.1 percent. Although miners led the markets higher technical indicators suggested the market was in "overbought" territory, with the relative strength index for the index at 71. Seventy and above is considered "overbought".
Sovereign debt concerns have continued to weigh on several peripheral euro zone countries and the cost of protecting Portuguese government debt against default rose to a record intraday highs on Tuesday. Nevertheless carmakers were in demand with Porsche SE up 7.2 percent on hopes Volkswagen would pay cash for a remaining stake in Porsche's automobile operations.
Strong corporate earnings news also helped boost market sentiment. Barclays rose 4 percent after it said it has a healthy capital position and sees bad debts falling by almost a third this year. Luxury group Hermes jumped 7.6 percent after it raised its 2010 earnings targets again and is on track for its best performance in 10 years. Adecco, the world's biggest staffing group, gained 3.7 percent on forecast-beating third-quarter results.
Not all corporate results were deemed positive, with Carlsberg slipping 5 percent after it warned of rising input costs in 2011 and lost market share in Russia. Across Europe, the FTSE 100 index was 0.4 percent higher, Germany's DAX was up 0.6 percent and France's CAC 40 was 0.8 percent higher.