London: European shares recovered from steep losses to close slightly higher on Tuesday, as strong US data helped to ease investors’ worries about the global economic recovery, though BP fell heavily.
The pan-European FTSEurofirst 300 index rose 0.2% to close at 1,002.80 points, having been down as much as 2% earlier.
“People will continue to look to economic data to see how the recovery is panning out, as opposed to just rumours and fear, which have been driving the market in the last month or so,” said Joshua Raymond, strategist at City Index.
Key US data boosted confidence. Construction spending rose unexpectedly in April, recording its largest monthly increase in nearly 10 years, according to a government report. Economists surveyed by Reuters forecast that construction spending would be unchanged in April.
Moreover, the US manufacturing sector expanded in May for a tenth straight month while employment rose slightly to its best level in six years, according to an industry report.
Index heavyweight BP capped the benchmark’s gains, slumping 13.1%, as it struggled to contain an oil spill in the US Gulf of Mexico. BP is down more than 34% from a peak last month, wiping more than £40 billion ($58.11 billion) off its value.
However, most other energy shares ended higher, as oil prices bounced, and the euro recovered from a four-year low.
Total, BG, Royal Dutch Shell and StatoilHydro rose between 0.6% and 2.6%.
Banks fell, but were off their lows by the end of the day, with Spain’s Banco Santander and BBVA down 1.5% and 1.4% respectively.
The European Central Bank warned late on Monday that euro zone banks may face another €195 billion ($236.9 billion) in potential write downs.
Earlier in the session, investor confidence had been fragile after manufacturing growth in China slowed down in May, and euro zone manufacturing activity expanded that month at a considerably more sluggish pace than April’s 46-month high.
The index lost 5.8% in May, hit by intensifying fears that a sovereign debt crisis in the euro zone could derail the global economic recovery.
Across Europe, the FTSE 100 index finished the day 0.5% lower, Germany’s DAX rose 0.3% and France’s CAC 40 fell 0.1%.
Spain’s IBEX lost 0.6%, Portugal’s PSI 20 rose 0.4% and Italy’s benchmark slipped 1.4%.
Wall Street was mixed around the time European bourses were closing. The Dow Jones and Nasdaq Composite were up 0.3% and 0.2% respectively; the S&P 500 was down 0.1%.
US and UK markets were closed on Monday for a holiday.
Among other individual shares, Prudential gained 6.3% after American International Group said it would not consider revising the terms of a deal for its Asian life insurance unit with the British insurer. The deal is now close to collapse.
Irish airline Ryanair rose 4.4% after it brought forward plans to pay its first dividend since being floated in 1997 and swung back to a full-year profit which was ahead of most rivals.