Europe Shares Bounce Back; KPN Sinks

European shares rose on Tuesday as signs of economic recovery in the euro zone helped soothe investors' worries a day after the return of political risks in Spain and Italy sparked a selloff in stocks.

Dutch telecom operator KPN bucked the trend, sinking 16 percent after unveiling a rights issue of 4 billion euros ($5.4 billion).

The FTSEurofirst 300 Index of top European shares provisionally closed 0.3 percent higher at 1,154.63 points, while the euro zone's blue chip Euro STOXX 50 index gained 1 percent.

"Yesterday's spotlight on Southern Europe was just an excuse to book profits and catch our breath. The trend is still positive, and clients are slowly coming back to equities," Kepler Capital Markets sales trader Patrice Perois said.

"U.S. earnings are much better than expected, there is no worry on that front, and apart from a few accidents in Europe such as KPN today and Saipem last week, results have been relatively good here."

Markit's Eurozone Composite PMI, seen as a good indication of economic growth, last month climbed to a 10-month high of 48.6 from 47.2 in December, an upward revision of the preliminary reading of 48.2.

Euro zone banks featured among the top gainers, with Banco Santander up 3 percent, BBVA up 2.3 percent and BNP Paribas up 1.9 percent.