Europe Holds Gains to Close Higher

European shares closed higher on Tuesday, with global shares bolstered by upbeat second quarter results from bellwether Alcoa. Marking the official start of second quarter earnings season, Dow component Alcoa posted earnings and revenue that topped Wall Street expectations, and said it remained optimistic that global demand for aluminum will grow 7 percent this year.

On Tuesday,the pan-European FTSEurofirst 300 Index provisionally closed up 0.8 percent at 1,189.64, extending a rebound that has seen stocks rally 6.5 percent since June. Britain's FTSE 100 closed up 1.1 percent and Germany's DAX was up 1.2 percent.

Alcoa's positive results helped bolster investors' confidence about European earnings season, particularly in the case of the basic resources sector, which closed 2.7 percent up on Tuesday.

(Read More: China Fears to Weigh on Europe's Earnings)


However, European shares pared some gains in the afternoon, after the International Monetary Fund downgraded its global growth forecast for this year to 3.1 percent, having predicted 3.3 percent growth in April. It also downgraded its growth outlook for 2014 to 3.8 percent, down from 4.0 percent.

(Read More: IMF Warns of 'Growing Pains' in Emerging Markets)

In other news, Latvia was formally accepted into the euro zone on Tuesday. The ex-Soviet satellite state will use the euro currency from the start of 2012. The European Union set the exchange rate at 0.702804 lats to one euro.

In addition, ECB policymaker Joerg Asmussen gave a speech in which he stated that Europe should accelerate plans to force private investors to share in the cost of bailing out failed banks. He said that bail-in plans targeting shareholders should be implemented as soon as January 2015.