European shares pared losses to close at five-year highs on Tuesday, after influential hedge fund manager David Tepper told CNBC he is "definitely bullish" on stocks.
(Read More: It's a 'My Cousin Vinny' Market, Bullish Tepper Says)
"What is going to make you bearish?" Tepper, the head of Appaloosa Management, said. "I think every place is the place to be in the stock markets of the world."
European shares were also boosted by upbeat earnings from the likes of aerospace giant EADS, Italian bank Intesa Sanpaolo and Deutsche Post, after all posted better-than-expected first quarter profits.
Meanwhile, shares in Severn Trent closed nearly 14 percent higher on confirmation that a consortium of buyers are looking to buy the U.K. water company.
Upbeat retail data from the U.S. also helped investor confidence, with ICSC Research saying it expected May sales to rise between 3 and 4 percent (excluding drug store sales). The data came on the back of a surprise rise in U.S. retail sales on Monday, suggesting a recovery in the sector.
Back in Europe, Germany's ZEW indicator of investor confidence came in at 36.4 for May, below expectations of 38.3. In addition, euro zone factory output data was released showing a month-on-month uptick to 1.0 percent in March.
(Read More: Euro Zone Factory Output Jumps on German Strength)