MARKET COMMENT: European Shares End Higher

European shares regained some poise Tuesday, with banks and miners among the best performers, as firms took back a portion of the previous session's sharp losses.

The pan-European Dow Jones Stoxx 600 index rose 1.1% to 226.61.

On Monday it closed down 2%, as investors worried that signs the global economy is improving may not translate into strong gains.

Newfound optimism about the economy was evident Tuesday in Europe, with the German ZEW economic expectations index rising more than expected to 56.1 from 39.5 in July.

Even after Monday's losses, the Stoxx 600 index is showing a gain of around 14% since the start of the year and of more than 9.5% so far this quarter.

"A bit of a sell off was to be expected," said Mike Lenhoff, strategist at brokerage Brewin Dolphin.

"The markets are looking a bit overbought," he added.

On a regional level, the U.K. FTSE 100 index rose 0.9% to 4,685.78, the German DAX index climbed 0.9% to 5,250.74 and the French CAC-40 index gained 0.9% to 3,450.69.

In Asia, the closely-watched Shanghai Composite Index ended higher after moving in and out of the red.

Shares also fell heavily on Wall Street Monday but started in positive territory on Tuesday, after better-than-expected earnings from retailers Home Depot and Target.

However, after mixed U.S. housing data, stock gains were modest.

Banks and miners, which are viewed as closely tied to economic growth, took the brunt of the selling in Europe Monday but recouped some of those losses Tuesday, with the banking sector up 1.9% and miners up 1.8% in the Stoxx 600.

Shares of Europe's biggest bank by market capitalization, HSBC Holdings, climbed 2.8% after it was upgraded by Goldman Sachs to buy from neutral.

The broker said it now believes the bank's HSBC Finance Corp. unit will cease to be a major drag on group earnings from 2010.

Of miners, Rio Tinto shares rose 1.7% after Australia's Amcor said it will pay $2.03 billion for the majority of Rio Tinto's Alcan Packaging business, marking its biggest-ever acquisition. link.....