ROTTERDAM/LONDON: European shares ended close to record highs on Tuesday on hopes of a vaccine-driven economic recovery, while investors looked past the fallout of a US hedge fund default that hit banking stocks a day earlier.

The pan-European STOXX 600 index gained 0.7%, trading less than a percent below its pre-pandemic peak.

Bank stocks jumped 2.7%, rebounding after a 1% drop on Monday, as US and European government bond yields rose on hopes of stronger economic growth and inflation ahead.

Swiss lender Credit Suisse fell 3.1%, following its near 14% slide in the previous session as it warned of “highly significant and material” losses after the fund, named by sources as Archegos Capital, defaulted on margin calls.

The German DAX rose 1.3% to scale a record high, boosted by automakers and a 1.6% rise in Deutsche Bank.

The benchmark STOXX 600 is on course to end the first quarter with a near 8% gain - its fourth straight quarterly rise - as global growth optimism overshadowed sluggish vaccination drives in the euro zone and new coronavirus-related lockdowns.

Italian luxury puffer jacket maker Moncler rose 2.9% and Swiss watch group Swatch gained 3.3% after Deutsche Bank upgraded their stocks to “buy”.

Defensive sectors such as utilities and healthcare fell, while rising yields weighed on highly valued technology stocks.