Europe Markets

European markets close higher on recovery hopes; Fed in focus; VW up 6%

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Key Points
  • Market focus is on the Federal Reserve which kicks off its two-day meeting on Tuesday, followed by a statement and briefing from Chairman Jerome Powell on Wednesday.
  • The Bank of England is due to meet on Thursday and the Bank of Japan will also begin its two-day policy meeting that day.

LONDON — European stocks closed higher on Tuesday as market attention focused on the global economic recovery and the latest meeting of the U.S. Federal Reserve.

The pan-European Stoxx 600 finished up 0.8%, with autos climbing 2% to lead gains while oil and gas stocks fell 1%.

Market focus is on the Federal Reserve which kicks off its two-day meeting on Tuesday, followed by a statement and briefing from Chairman Jerome Powell on Wednesday.

A surge in interest rates and a rebounding U.S. economy has put the central bank's easy policies in the spotlight and market watchers have questioned when the Fed may consider unwinding those policies.

Later this week, the Bank of England is due to meet on Thursday and the Bank of Japan will also begin its two-day policy meeting that day.

Asia-Pacific markets edged higher on Tuesday, following a relatively subdued start to the global trading week as investors look ahead to the Fed meeting. On Wall Street, tech stocks powered the Nasdaq higher and steadied the broader market.

Coronavirus vaccine news remained in focus in Europe after Germany, Spain and France also suspended use of the AstraZeneca-University of Oxford vaccine over blood clot concerns.

The World Health Organization, health experts and the vaccine maker have sought to downplay ongoing safety concerns, saying there is no evidence currently to suggest a link between the shot and an increased risk of developing blood clots. The European Medicines Agency is carrying out investigations.

Biggest movers

Earnings on Tuesday came from VW, RWE, Zalando and Greggs on Tuesday.

Volkswagen is targeting 5%-6.5% operating margin this year and 7%-8% in the ensuing years, as it eyes cost cuts and an ambitious expansion into the electric vehicle market. Shares of the world's second-largest automaker surged 6.7%.

"Within the next 15 years we will see a total turnover of the industry. Electric cars are taking the lead and then software really becomes the core driver of the industry," CEO Herbert Diess told CNBC on Tuesday.

VIDEO9:1209:12
Watch CNBC's full interview with Volkswagen CEO Herbert Diess

German car battery manufacturer Varta soared more than 14% to lead the Stoxx 600 after announcing that it will start producing battery cells for electromobility.

Zalando and French telecoms company Iliad gained 5% and 4.5% respectively after strong full-year results.

At the bottom of the European blue chip index, German biotech firm MorphoSys dropped 10% after its full-year earnings report.

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