Europe closes sharply higher on reduced hike fears

European equities rallied to close higher on Tuesday, with fears over an impending interest rate hike in the U.S. receding and investors cheering acquisition news.

The pan-European Euro Stoxx 600 Index closed around 1.5 percent higher, with most major indices finishing over 1 percent higher.


Global courier delivering service FedEx announced Tuesday morning that it is looking to buy rival TNT Express. Shares of the Dutch firm popped as much as 30 percent in early trade, with other delivery companies also rising on the news.

PostNL shares rose as much as 16 percent in early deals, before closing around 12 percent higher. Royal Mail closed up over 1 percent and Kuehne & Nagel also finished 2 percent higher.

Read MoreFedEx offers to buy TNT Express for $4.8BN

Also on Tuesday, French media conglomerate Vivendi confirmed an offer to Orange's online video-sharing platform, Dailymotion. Vivendi shares closed up 1.2 percent; shares of Orange (formerly France Telecom) ended around 1.6 percent higher.

Dovish Fed?

Meanwhile, the basic resources sector saw stellar gains on Tuesday, rising 3 percent, which helped the metal-heavy FTSE 100 to post a rise of around 1.7 percent. Miners were buoyed by higher metal prices in recent sessions, with weak data in the U.S. cooling fears of a rise in benchmark interest rates.

"Today sees the first opportunity traders have to price in the weak non-farms number and its dovish consequences for any looming Fed rate hikes," Marius Paun and Jonathan Sudaria, two dealers at Capital Spreads, said in a research note.

U.S. stocks traded higher on Tuesday as investors eyed oil prices and renewed dollar strength ahead of the unofficial beginning of earnings season on Wednesday.

Crude oil reversed to trade higher above $53 a barrel after settling up more than 6 percent on Monday. Overnight, oil slumped on a report from Goldman Sachs that said prices needed to remain low for months to achieve a slowdown in U.S. output growth.

—With contribution from Evelyn Cheng