By Kit Rees and Danilo Masoni
LONDON (Reuters) - Strength among commodity firms and banking stocks as well as a string of solid updates boosted European shares on Tuesday.
Earnings season remains front and center for equities investors though the focus will also be on the two-day U.S. Federal Reserve meeting which gets under way later in the day.
Expectations are for the Fed to wait for the fourth quarter before raising rates, as U.S. economic data have been weaker than expected.
The pan-European STOXX 600 (STOXX) index rose 0.4 percent, holding onto gains seen earlier in the session, as Wall Street opened higher and a key gauge of expected volatility (VIX) plunged to its lowest in more than 23 years.
Yet some investors expressed a note of caution.
"We're at that difficult junction in the middle of the year where we've rallied, we've done well, (we're) starting to accept that central banks are normalizing more, but we haven't actually seen much more," said Mike van Dulken, head of research at Accendo Markets. "So are people starting to question the macro environment a bit more than they were?"
Corporate results season gathered steam with British business media group Informa (L:INF) and Dutch staffing firm Randstad (AS:RAND) up 2.7 and 4.9 percent respectively after well-received first-half updates.
Among outperforming banks, Raiffeisen (VI:RBIV) was a standout gainer, up 6.8 percent, after second-quarter profit roughly tripled to 365 million euros ($425.41 million), helped by reductions in bad debt provisions.
Miner Antofagasta (L:ANTO) was the biggest gainer on the STOXX as the sector was buoyed by a surge in copper prices.
Europe's tech sector (SX8P) saw iPhone supplier AMS (S:AMS) and mobile speaker maker Logitech (S:LOGN) rise in initial deals after both firms raised their outlook.
Both stocks however reversed course as tech stocks in the United States lost ground following Google parent Alphabet's (O:GOOGL) warning that expenses would remain high as more searches shift to mobile devices.
"There's some truth about general fear in tech after the slight Google disappointment on traffic acquisition costs being higher, and the strong performance and generally positive positioning of investors to the sector," said Martin Moeller, head of global equity at Union Bancaire Privée, which holds AMS.
Updates weighed on paper maker UPM (HE:UPM), Cembra Money Bank (S:CMBN) and Domino's Pizza (L:DOM), which all fell between 1.6 percent to 7.4 percent.
While it is still early days for the European second quarter earnings season as only 20 percent of firms have given updates, more than half of those firms have beaten analysts' expectations, according to Thomson Reuters data.
The Paris-listed shares of TechnipFMC (PA:FTI) fell 1.8 percent after the oil services firm said that it had overstated its first-quarter earnings.
European deal-making also rolled on with U.S. retailer Michael Kors (N:KORS) agreeing to buy luxury shoemaker Jimmy Choo (L:CHOO) for $1.2 billion. That sent Jimmy Choo shares up 17 percent to an all-time high.