European shares bounced back on Wednesday after sharp losses in the previous session, with banks gaining ground ahead of the U.S. Federal Reserve's rate decision and with Renault leading automobile stocks higher.
At 0920 GMT, the FTSEurofirst 300 index of top European shares was up 1 percent at 978.66 points after falling 1.2 percent to a one-month closing low on Tuesday.
The index, which is up 17.6 percent so far in 2009, has gained 51 percent since hitting a record low in early March.
Auto shares were in demand, with European carmakers rising 2.8 percent to feature among the biggest gainers, bouncing back from a 14-percent selloff over the past two weeks, after Nissan Motor revised its annual forecast.
Renault, which has a significant stake in Nissan, rose 4.8 percent, while Daimler, Peugeot and Fiat added 2.4 to 3.7 percent.
In other industry news, after months of negotiations, General Motors has abandoned the sale of Opel to a group led by Canada's Magna, saying improving business conditions and the strategic importance of Opel had prompted the decision by its board.
"The macro data flow has been very positive over the last couple of days and I think the markets can go a bit higher from here," said Klaus Wiener, research head at Generali Investments.
"In the end, the markets will take their lead from macro-economic data flow and earnings. The aggressive cost cuttings that we have seen, especially in the U.S. and a big drop in unit labour cost are good for profit margins."
Data showed on Tuesday that new orders received by U.S. factories beat expectations to rise 0.9 percent in September, while Redbook Research said U.S. chain store sales rose 0.9 percent last week.
Banks gained, after steep losses on Tuesday following disappointing results from UBS and sharp declines in Royal Bank of Scotland shares. The DJ STOXX European banking index gained 2.2 percent and is up 155 percent since a floor in March.
Societe Generale advanced 5.5 percent. It doubled its third-quarter net profit from a year ago, but said the economic environment remained uncertain.
UBS was up 3.1 percent, while Royal Bank of Scotland rose 3.4 percent. Standard Chartered, HSBC, Barclays, Lloyds, BNP Paribas, Allied Irish Banks and Bank of Ireland gained between 0.9 percent and 11.7 percent.
Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 rose 0.8-1.3 percent.
MINERS UP, RISK APPETITE GROWS
Miners got strength from higher base metals prices, which gained on expectations of a dollar sell-off after the Fed meeting. A fall in the dollar makes commodities cheaper for holders of other currencies and often boosts their demand.
The Fed is expected to reaffirm at the end of its two-day meeting on Wednesday that policies to support the economy will stay in place for some time, even as signs of recovery mount.
BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 1.2 to 3.3 percent.
Retailers were also in demand. Marks & Spencer advanced 5.6 percent after reporting flat first-half profits, towards the top end of expectations as tight management of costs and stock offset weak sales.
Britain's Next was up 5.3 percent. It recorded better than expected third-quarter sales and upgraded its sales and profit guidance for the balance of the year.
Investors' appetite for risky assets grew, with the VDAX-NEW volatility index falling 4 percent after hitting a six-week high on Tuesday. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the higher is the desire for risk.
Pharmaceutical stocks, generally seen as defensive plays, were broadly lower. AstraZeneca, GlaxoSmithKline, Novartis, Roche Holding and Sanofi-Aventis fell 0.4 to 1.5 percent.
