Europe shares rally on ECB stimulus hopes

European shares traded sharply higher on Tuesday as buying was fueled by corporate earnings and reports that the European Central Bank (ECB) would provide extra liquidity in the near future.

Banks and shares in peripheral countries led the rally, offering investors some much-needed relief as consistent selling from last week bled into yesterday's close.


Earnings help shares

The pan-European Euro Stoxx 600 Index closed provisionally higher after dipping in early deals on Tuesday. Akzo Nobel shares climbed nearly 5 percent after its third-quarter results saw a profit rise due to recent cost cutting plans. Swedbank shares rose 4.6 percent after its quarterly profit managed to beat forecasts in a Reuters poll.

Meanwhile, ARM Holdings also climbed around 5 percent with the chip designer highlighting a 9 percent rise in pretax profit for its third-quarter period.

Investors were also buoyed by reports from Reuters - citing sources - which said that the ECB could begin buying corporate bonds in the secondary debt markets from as soon as this December. Both the Spanish and Italian markets rallied to close more than 2 percent higher.

Existing-home sales lift U.S. stocks

U.S. stocks rose on Tuesday, with the S&P 500 and the Nasdaq Composite extending gains into a fourth day, as investors embraced earnings from corporations including Apple, Texas Instruments andUnited Technologies.

Benchmark indexes largely held gains after a report had sales of existing homes in September increasing to a one-year high.

Apple shares gained over 1 percent in early afternoon trade.

China GDP beats

Figures overnight on Tuesday showed that China's gross domestic product (GDP) grew 7.3 percent on year in the July-September period, the slowest pace in nearly six years. Still, the figure was above forecasts for a 7.2 percent rise. Other data showed September industrial output increasing 8 percent on year, beating estimates, but retail sales and fixed-asset investment both missed expectations.

"While disappointing data may spark another round of growth concerns and trigger risk aversion, it may also raise bets that more targeted measures will be implemented to reach the official growth target of 7.5 percent," said Vishnu Varathan, senior economist at Mizuho Bank in a note.

Reckitt Benckiser falls

In other stocks news, shares of oil major Total ended the day up 3 percent after the news that Chief Executive Christophe de Margerie had been killed in an airplane collision at Moscow's Vnukovo International Airport.

Read MoreTotal CEO killed in Moscow plane accident

Meanwhile, Reckitt Benckiser shares closed 2 percent lower after the consumer goods maker reported soft trading figures which have been affected by tough conditions in Europe.

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