European shares crept toward record highs on Tuesday as optimism around a stimulus-led economic recovery from the COVID-19 pandemic overshadowed fears of global central banks tightening monetary policies sooner than expected.

The pan-European STOXX 600 was up 0.1% by 0703 GMT, with economically sensitive stocks including banks, miners and energy stocks leading gains.

The group was hammered last week following signals from the US Federal Reserve that inflation was rising more than expected, but European Central Bank President Christine Lagarde on Monday calmed those fears by saying the euro zone and the United States were "in a different situation".

Investors this week are looking to a host of Federal Reserve speakers to calm market volatility, saying the reaction to last week's meeting was too extreme.

In company news, Italian challenger bank Illimity rose 2.3% as it said it expected to roughly double its net income in the next two years following a strategic partnership with ION, a privately owned financial data and technology group.