European markets closed higher across the board Tuesday, but off session highs, after news of fresh liquidity action from the Federal Reserve and other central banks boosted the major indexes.
Stocks had been in the green earlier after better-than-expected German business sentiment data counterbalanced weak earnings from major companies such as EADS and Antofagasta.
U.S. stocks were also higer on news the Fed was heading up a coordinated effort to expand its securities lending program to add liquidity to the tight credit markets.
"The Fed appears to be working or stepping beyond just the interest rate measures which clearly some people were starting to believe just weren't working," said Philip Isherwood, a strategist at Dresdner Kleinwort.
European banking stocks rallied on the back of the move, with the UK's Barclays gaining over 5 percent, while Societe Generale jumped 4.5 percent.
In corporate news, Franco-German aerospace and defense company EADS'slosses widened more than expected on cost overruns at Airbus. The stock fell 6.8 percent as Boeing vowed to challenge the European rival's award of a $35 billion U.S. Air Force tanker contract.
Shares in Nokia plummeted more than 5 percent after Texas Instruments cut its first-quarter forecasts citing a weaker 3G market. Texas Instruments' European rivals Infineon and STMicroelectronics were also lower.
UK-listed Chilean miner Antofagastareported a 3.8 percent drop in full-year pretax profit, slightly below market expectations. It also warned that costs were expected to rise this year, sending shares lower by 0.6 percent.
Also in the UK, Cadbury Schweppesoutlined plans to de-merge its U.S. drinks business, saying it expected to complete the process by April 11.
And operating profit at British life insurerFriends Provident tumbled. The company also said its finance director will stand down in the summer.
Meanwhile, investors continued to put money into commodities in a hedge against inflation and the weak dollar, sending oil to a new record above $109 a barrel.
German investor sentiment unexpectedly improved in March, according to the ZEW Institute's monthly survey, confirming the view that Europe's largest economy made a solid start to the year despite weaker global growth and a strong euro.
In France, Societe Generale said its $8.45 billion rights issue was oversubscribed, providing a base for its battle to recover from a trading scandal.
- Reuters contributed to this report.