European markets ended mostly higher Tuesday as weak U.S. home-sales data raised expectations of an interest rate cut in America later in the month. The major indexes were already higher as investors bought up defensive stocks such as pharmaceuticals and telecoms in the face of a potential recession in the U.S.
"The market is torn between two factors: fears of a U.S. recession on both the earnings and the macroeconomic fronts, and hopes that the Fed will cut rates aggressively. The latter factor could underpin the market," said Franz Wenzel, strategist at AXA Investment Managers, in Paris.
Asian stocks closed mixed, with Japan's Nikkei managing a late rally as investors snapped up bargains in banks, shipping and railway stocks. U.S. stocks were broadly higher following the real-estate data.
On the corporate front, shares of Swiss bank UBS ended 1.8 percent higher after CEO Marcel Rohner told a Swiss newspaper that risk exposures have been significantly reduced and the bank does not require further capital injections to shore up its finances.
Markets could be stuck in a trading range ahead of rate decisions from the European Central Bank and the Bank of England on Thursday.
But, politics added some trading energy, however, as French President Nicolas Sarkozy addressed the nation to outline his strategy for 2008, which he said would include broad-based reforms.
Shares in French broadcaster TF1 soared 10 percent following Sarkozy's speech as he revealed plans to ban advertising on public TV channels. The move could be seen as part of what the French President referred to in his address as a "political and strategic choice to protect its companies."
And UK Prime Minister Gordon Brown gave his monthly press conference, which was attended by Finance Minister Alistair Darling. Brown said inflation hit 2.1 percent at the end of 2007, which would cause prices rises, but he would make "difficult decisions on public sector pay" to keep inflation in check.
Before the bell, the British Retail Consortium said that December retail sales grew at the slowest pace since March 2006.
But on a more encouraging note in London, shares of recruiter Michael Page gained 4.9 percent after the company reported a 38 percent rise in fourth-quarter profit.
-- Reuters contributed to this report