European shares rose on Tuesday, bouncing back from falls in the previous session, as fears eased about the fallout from Dubai's debt problems and investors' appetite increased for relatively risky equities.
Banks and commodity stocks provided the bulk of the gains for the index as investors piled back into assets perceived as sensitive to economic recovery.
By 0930 GMT, the FTSEurofirst 300 was 1.8 percent higher at 1,005.72, having fallen 1.4 percent in the previous session.
Efforts by Dubai World to restructure about $26 billion in debt reassured investors that its debt problems can be contained.
Markets took a beating last week after Dubai said it would ask creditors of Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step to restructuring.
"The market is acknowledging that the Dubai crisis is contained to the region itself," said Heino Ruland, strategist at Ruland Research, in Frankfurt.
Banks were among the strongest gainers, with Barclays, HSBC , Deutsche Bank and BNP Paribas up between 1.6 and 2.7 percent.
Greek banks, which were hit hard last week on worries over funding, were the biggest beneficiaries of the returning risk appetite.
EFG Eurobank and National Bank of Greece added 5.3 and 5.8 percent respectively.
"Banks in the U.S. rallied in the last hour of trade and that optimism has been transferred to Europe," said Ruland.
Investors also drew comfort from German jobless data, showing an unexpected fall in unemployment in November, and after euro zone PMI was revised higher.,
The Bank of Japan said it would pump more cash into the banking system after an emergency meeting it called on Tuesday.
Miners were firmly in positive territory as gold held steady, while base metals gained ground. Rio Tinto, Xstrata, Lonmin, Anglo American, Kazakhmys and BHP Billiton added 2.3 to 3.2 percent.
ENERGY BOOST
Energy stocks benefited from a rise in crude to just below $78 per barrel.
BG Group, BP, Royal Dutch Shell, Repsol and Total added 1.3 to 2.7 percent.
Alstom was near the top of the European leaderboard, up 5.9 percent after it emerged that, with Schneider, it is in exclusive talks with Areva to buy the nuclear reactor maker's transmission and distribution unit.
Areva added 0.7 percent while Schneider gained 4 percent.
Among a relatively small list of losers, EADS fell 1.6 percent after HSBC downgraded it to "underweight" from "neutral" in a note on the aerospace sector.
Britain's FTSE 100, Germany's DAX and France's CAC 40 were up between 1.6 and 1.9 percent.
Investors awaited U.S. ISM manufacturing data for November and U.S. pending home sales data for October, both due at 1500 GMT.
