European stocks closed higher Tuesday after European Union negotiator Michel Barnier said a Brexit deal between the bloc and the U.K. is still possible this week.
European markets
The pan-European Stoxx 600 was 1% higher at the closing bell. Retail and banking stocks climbed 2.4% to lead gains as all sectors traded in positive territory.
Most major bourses were trading higher, with only the U.K.'s FTSE bucking the trend on a slight loss.
Speaking in Luxembourg ahead of a critical meeting between European leaders, which will likely decide the fate of Brexit, Barnier said: "Our team(s) are working hard, and work has just started now today, this work has been intense over the weekend and yesterday, because even if the agreement will be difficult, more and more difficult, to be frank, it is still possible this week."
Sterling surged 1% higher against the dollar on the back of the news, reaching $1.2733 at around 4:30 p.m. London time. A separate report suggesting a draft deal was in the works helped the currency shoot to a 4-month high.
Data released Tuesday morning showed that the U.K.'s unemployment rate rose by 22,000 in the three months to the end of August, taking the jobless rate up from 3.8% through the spring to 3.9% over summer.
Stocks had retreated Monday after news that China wants to conduct further talks before putting pen to paper on the first phase of a partial trade deal with the U.S., reportedly requesting a halt to further tariffs from Washington scheduled for December.
U.S. Trade Secretary Steven Mnuchin told CNBC Monday that December's tariffs would likely go ahead without a deal in place between the world's two largest economies.
Stateside, stocks were trading higher as investor optimism was lifted by a strong set of corporate earnings reports.
Goldman Sachs, Citigroup, BlackRock and J.P. Morgan Chase all reported before the bell on Wall Street. The latter was the standout performer, with third-quarter profit rising 8% to $9.1 billion, surpassing analyst expectations and causing the bank's shares to surge.
Goldman Sachs shares suffered after posting a $1.88 billion profit, well below Wall Street expectations.
Foreign policy remains center stage in the U.S., after President Donald Trump imposed sanctions on Turkey and halted trade negotiations with Ankara, along with raising tariffs on Turkish steel by 50%, in a bit to stop the NATO ally's incursion in northeast Syria.
The Turkish lira rose on the news as markets seemingly shrugged off the tariff threats.
Back in Europe, Spain's Supreme Court on Monday jailed nine Catalan separatist leaders for their role in what was deemed an illegal independence bid in 2017, sparking mass protests in Barcelona.
Meanwhile in Poland, the populist Law and Justice (PiS) party secured a second term in power following Sunday's parliamentary election, but lost the upper house.
Stocks on the move
British recruitment group Hays saw its shares rise 8% after reporting flat net fees for the first quarter as overseas growth offset U.K. weakness.
Wirecard plunged 12.8% to the bottom of the Stoxx 600 after the Financial Times published documents detailing the German payment company's accounting processes. Interpump Group shares fell 8% to hit a six-week low as Kepler Cheuvreux cut the Italian water pump maker's target price by 3.5%.
— CNBC's Silvia Amaro contributed to this report.