Global markets rose Tuesday on hopes the Fed may take some action to boost the flagging U.S. economy. The Federal Open Market Committee began its two-day meeting Tuesday.
But market volatility may continue. "All we're seeing is fits and starts. We get a two or three-day rally that gives way to a profit-taking binge," said Stephen Pope, managing partner at Spotlight Ideas.
The markets shrugged off a cut in Italy's credit ratings by one notch at Standard & Poor's. Italy's FTSE MIB index rose 1.9%, with auto maker Fiat SpA rising 7.2%. Markets stayed hopeful that Greece would get a fresh injection of aid, amid media reports the country was close to agreement.
A call between Greek Finance Minister Evangelos Venizelos, the International Monetary Fund, the European Commission and the European Central Bank on Monday was "productive." Another call with the so-called troika will take place on Tuesday.
Still, the ASE Composite index fell 0.7% in Athens.
In Paris, shares of Societe Generale SA dropped 3.1%. Among other banks, BNP Paribas SA fell 6.5% and Credit Agricole SA dropped 2.1%.
The French CAC 40 index still rose 1.5% to close at 2,984.05. It was aided by a 3.2% gain for pharmaceutical group Sanofi SA after a ruling in its favor by a U.S. district court over India-based Sun Pharmaceutical Industries Ltd.
The ruling effectively will keep Sun's generic copies of Sanofi's colon cancer drug Eloxatin off the U.S. marketplace until August 2012.
Other drug stocks were also on the rise, with GlaxoSmithKline PLC gaining 2.2%.
The French index was also lifted as luxury-goods group LVMH Moet Hennessy Louis Vuitton added 3.6%, amid broad gains for the retail sector.
Stoxx 600 heavyweight Hennes & Mauritz AB rose 4.2%.
The FTSE 100 index gained 2% to close at 5,363.71 as retailers and miners added to gains from drug stocks.
Luxury-goods firm Burberry Group PLC rose 3.5% as London Fashion Week got under way Monday. Kingfisher PLC added 2.7%.
Shares of retailer Metro AG rose 3.6% in Germany, while sportswear maker adidas AG gained 3.7%.
The German DAX 30 index rose 2.9% to settle at 5,571.68.
Utilities E.On AG and RWE AG rose 4% and 3.7%, respectively, after a Hamburg court reportedly questioned the legality of the German nuclear fuel tax on Monday, according to media reports.
On the downside, shares of Deutsche Lufthansa AG sank 4.4%, as the airline issued a profit warning that took markets by surprise after weaker-than-expected August results. It said a further rise on the prior year's operating profit is "no longer achievable." That news weighed on other airlines, with Air France-KLM down 3.7%.
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