Europe rallies on U.S. numbers

LONDON, England -- European stock markets closed near session highs on Tuesday as data confirmed the U.S. consumer is alive and kicking, and as New York rallied ahead of a Federal Reserve meeting on interest rates.

Swedish telecoms equipment maker Ericsson surged as liquidity concerns eased ahead of its bumper rights issue and Dutch publisher Wolters Kluwer jumped 13 percent after it beat expectations with its half-year results and stuck to its full-year forecasts.

Autos was the strongest sector, boosted in part by the U.S. retail sales data, while on the downside Germany's Bayer led a decline in chemical stocks following recent impressive gains.

"Wall Street has been very resilient recently," Michael O'Sullivan, European strategist at Commerzbank, told Reuters. He said the rise in U.S. indices was the main catalyst for the afternoon turnaround in European markets.

"The futures have always opened negatively, but the market in New York has largely ended positively, and Europe is probably still lagging the U.S. to some extent."

By 1605 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index of pan-European blue chips was 0.97 percent higher after earlier being down one percent.

It has now added around 7.5 percent since its five-year lows of July 24 and is back up near the level it plumbed on September 21, in the wake of the World Trade Center attacks.

The narrower DJ Euro Stoxx 50 index, which has lost around 28 percent since the start of the year, was 0.87 percent firmer.

London's FTSE 100 share index closed up 50.1 points, or 1.2 percent, at 4,271.7, the days high, and more than 100 points above its earlier low.

The Swiss SMI rose 1.5 percent to 5,325 with gainers outnumbering losers 20 to 7. In Madrid, the Ibex-35 closed up 50.3 points, or 0.8 percent, to 6,271.4 points after spending a large chunk of the session falling in a low-volume market.

Trading in Paris was thin with the benchmark CAC-40 closing up 0.77 percent at 3390.23 in one of the quietest sessions so far this year.

The U.S. Federal Reserve was due to announce its decision on U.S. interest rates at 1815 GMT, after the last of Europe's equity markets was closing.

Earlier data showed U.S. retail sales rose 1.2 percent in July, with the core figure excluding auto sales rising a far more modest 0.2 percent.

"This is a positive gauge of the temperature of the consumer," Matthew Wickens, global economist at ABN Amro, told Reuters.

"If they were really concerned about job losses and the possibility of a double dip recession, they wouldn't be going out and buying cars in the way they are."

But others were more sceptical.

"The real question is where these car sales are coming from. If they're coming from stocks, which looks to be the case, then its impact on GDP is zero," said Jane Edwards, senior international economist at Lehman Brothers.

"We'll get an indication of that when we see the industrial production data on Thursday but, given the recent ISM and employment reports, the outlook doesn't look too bright."

French media leader Vivendi Universal slipped 1.2 percent after the Wall Street Journal Europe said the cash-strapped group planned to take a charge of as much as 10 billion euros against its second-quarter earnings -- much higher than recent estimates.

The group will post its results on Wednesday.

Ericsson leapt 8.2 percent after it said it will not have to ask shareholders for more money once its completes its looming $3.1 billion rights issue, and Switzerland's top bank UBS added 3.3 percent on the back of bright second-quarter results.

Wolters was the biggest gainer on the Eurotop 300, while German truckmaker Mann also lured investors with its results, prompting a 5.5 percent rise in its stock.