Europe close: Stocks and oil bounce back

European stocks staged a powerful bounce as oil prices recovered, with investors looking to the start of the Federal Reserve’s two-day policy meeting.

The benchmark DJ Stoxx Europe 600 index was up 2.87% to hit 359.58, France’s CAC 40 was up 3.16% and Germany’s DAX advanced 3.07%.

Stocks fell heavily on Monday, with energy-related shares in particular under the cosh as oil prices skidded.

It was a brighter picture on Tuesday, however, with front month Brent crude futures up 1.92% to $38.66 a barrel.

Autos performed well as data from the European Automobile Manufacturers Association revealed a 13.7% increase in new car registrations in November, marking the 27th month of consecutive growth.

The Stoxx 600 autos and parts index finished up 3.07% but it was the Oil&Gas index that paced gains, rising by 3.89%.

Despite the upbeat tone, some market participants were sceptical.

“Still it needs to be seen if the bottom of the current move is in place or if this is merely a ‘technical reaction’ due to highly oversold short-term market conditions with more downside to come,” said Markus Huber, senior analyst at Peregrine & Black.

Among individual stocks, BHP Billiton was a high riser after Credit Suisse upgraded the stock to ‘outperform’ from ‘neutral’.

Rio Tinto was also in the black after its Oyu Tolgoi expansion project received a boost when a syndicate of banks and international governments agreed $4.4bn (£2.9bn) in loans.

Shares in engineering software group Aveva tumbled 28% after it announced that it had terminated takeover talks with Schneider Electric.

French pharmaceuticals company Sanofi rallied after announcing that it will swap some assets with Boehringer Ingelheim.

Faurecia was also on the front foot after the car parts group agreed to sell one of its division to Plastic Omnium.

Hennes & Mauritz edged higher despite posting weaker-than-expected November sales growth.

Shares in Swiss pesticide maker Syngenta AG registered an advance following a report that China National Chemical Corp’s chairman Ren Jianxin met the company in Europe last week as the Chinese chemical firm looked to move ahead with a takeover plan.

On the downside, though, stock in Dialog Semiconductor fell sharply after the German chip-maker cuts its revenue guidance.

In macroeconomic news, data from the ZEW Center for European Economic Research in Mannheim showed German economic sentiment rose for the second consecutive month in December.

The headline ZEW expectations index rose to 16.1 in December from 10.4 the previous month, surpassing forecasts for a reading of 15.

The assessment of the current economic situation in Germany was largely unchanged, with the index nudging up 0.6 points to 55.0 points and beating expectations for a reading of 54.2.

Elsewhere, data from Eurostat showed employment growth in the euro bloc rose a seasonally-adjusted 0.3% in the third quarter, marking a slightly slowdown from 0.4% growth in the previous quarter.

On the year, employment rose 1.1% following a 1% increase.