Europe close: Stocks buoyed by Yellen, economic data

European stocks saw moderate gains on Tuesday, supported by an upbeat reading on German investor confidence and gains on Wall Street as US Federal Reserve Chair Janet Yellen testified before a Senate committee.

The benchmark DJ Stoxx Europe 600 index finished up by 0.70%, France’s CAC 40 was 0.61% higher and Germany’s DAX was 0.54% firmer.

At the same time, oil prices retreated, with West Texas Intermediate down 1.52% at $49.21 a barrel and Brent crude down 1.56% to $49.88.

Stocks racked up strong gains on Monday as investors reacted to the latest referendum polls, which showed a swing in favour of the Remain camp.

On Tuesday, however, the polls were split down the middle, suggesting it was too close to call. An ORB poll for the Daily Telegraph put the Remain campaign in the lead by seven points, while a poll from YouGov for the Times gave the Leave camp a two-point lead.

Speaking before the US Senate´s Committee on Banking, Housing, and Urban Affairs, Yellen said that the recent improvement in household spending, together with underlying conditions that are favorable for the economy, led her to expect further improvements in the labor market and the economy more broadly over the next few years.

However, she also cautioned that those expecting the slowdown in productivity over recent years to continue might be correct.

"We would like to note that if the ‘secular stagnation’ hypothesis is correct, then the Fed’s current hiking plans will need further downward adjustment. In fact, we could see the Fed take a pause for a sustained period of time," economists at Rabobank said in a research note sent to clients.

The upbeat tone in stocks on Tuesday was also underpinned by the latest survey from the ZEW Center for European Economic Research in Mannheim, which showed German investor confidence unexpectedly improved in June.

The current situation index rose 1.4 points to 54.5, beating expectations of a reading of 53.0. Meanwhile, the indicator of economic sentiment improved 12.8 points from the previous month to 19.2, smashing expectations of 5.0.

The indicator of economic sentiment for the Eurozone, meanwhile, was up 3.4 points to a reading of 20.2. Economists had expected a reading of 15.3.

Investors also digested news that Germany’s Constitutional Court had cleared the European Central Bank’s emergency bond-buying scheme.

Launched at the height of the Eurozone debt crisis in 2012 as part of ECB President Mario Draghi’s commitment to do “whatever it takes” to preserve the euro, the Outright Monetary Transaction programme allowed the bank to buy the debt of financially-strained members, in secondary, sovereign bond markets.

In corporate news, Whitbread rallied after reporting an improvement in sales in the first quarter as its Costa coffee shops bounced back from a slowdown in the preceding few months.

BHP Billiton was a little lower after saying it was targeting another $600m in coal production costs by the end of the 2017 financial year.

Germany’s Kion Group was under the cosh after the supplier of forklift trucks and warehouse equipment said it was buying US logistics company Dematic Corp for around $2.1bn.