Euro Stocks End Higher on Fed Cut Hopes

Europe's major stock indexes closed higher across the board Tuesday, buoyed by hopes that the Federal Reserve will cut interest rates again on Wednesday in order to avoid the world’s largest economy going into a recession.

Putting more pressure on the Fed to cut rates were U.S. new-home sales for December, which fell 4.7 percent to the lowest rate in 13 years. Investors are expecting a 50 basis point rate cut Wednesday, when the monetary policy meeting ends.

In George W. Bush's last State of the Union address Monday, the U.S. President urged Congress to act quickly to approve the $150 billion stimulus package to stave off a recession through tax rebates.

In London, the UK government told BSkyB to reduce its stake in ITV to below 7.5 percent. The decision could wipe out 40 percent of Sky’s profits for the year. ITV said it welcomes the news. Shares of ITV increased by 2.1 percent.

Alliance & Leicester said trading will be in line with current expectations and announced that CEO David Bennet will take a leave of absence due to illness, sending shares lower by 3.5 percent.

Singapore state-owned investment group Tamasek raised its stake in Standard Chartered further; the sovereign wealth fund now owns 19 percent of the London-listed bank.

UK Prime Minister Gordon Brown played host to the leaders of France, Germany and Italy, as well as European Union President Jose Manuel Barosso, as they attempt respond to six months of turmoil in the global financial markets.

French President Nicolas Sarkozy is expected to ‘call for order’ in the global financial markets.

Meanwhile, the French government is piling more pressure on Societe Generale after a Paris prosecutor rejected full-scale fraud charges against the alleged rogue trader, Jerome Kerviel.

The Finance Minister Christine Lagarde said the bank is in crisis and the board must decide the fate of CEO Daniel Bouton. President Nicolas Sarkozy already suggested he wants Bouton out.

Prosecutors said that exchange officials warned the company last year about suspect deals made by Kerviel.

In Germany, Deutsche Telekom shares closed 0.6 percent higher after it increased the number of broadband customers in the fourth quarter. But the former state-owned monopoly lost 537 thousand fixed-line connections in the same period as customers switched to mobile handsets.

Deutsche Telekom launches a 2-day conference in Berlin later in the morning to update investors on its strategy for its three main units.

And in other news, gold hit another record high just short of $930 an ounce, before falling back. Platinum also hit an all-time high of $1,735 an ounce. Precious metal prices increased on a weaker dollar, spurned on by Fed rate cut expectations and added supply pressure from disrupted output in South Africa.

The rising commodities prices sent shares of basic resource companies higher. Shares in Kazakhmys rose 4.7 percent, Antofagasta was up 6.7 percent, Anglo American increased by 5.8 percent and Arcelor Mittal rose by 2.5 percent.

© 2009 CNBC.com