European shares edged up on Tuesday with telecoms stocks rising to offset losses in major financial shares although Germany's benchmark equity index slipped on weak economic data.
Traders said most investors remained bullish on the long-term prospects for European equities, arguing that any decline would be relatively minor and short-lived before equity markets recovered ground again.
The pan-European FTSEurofirst 300 index, which had risen to a 22-month high last week, was up by 0.1 percent at 1,162.37 points, recovering from losses of 0.2 percent at the open.
The euro zone's blue-chip Euro STOXX 50 index also rose 0.1 percent, although Germany's DAX fell 0.1 percent to underperform after data showed a contraction in the German economy.
"The DAX underperformance is on the back of that," said XBZ Ltd European equity options broker Mike Turner.
However, low volatility signalled that few investors expected a deeper fall on European equity markets and that investor confidence remained relatively stable.
The Euro STOXX Volatility index, which tends to rise on signs of increasing investor fears over the market and economy, was down by 0.2 percent to 16.79.
"Trend followers will still be in bullish mode. There aren't really any bearish signals out there," said Central Markets senior broker Joe Neighbour.
TELECOM STOCKS GAIN
The STOXX 600 European telecoms sector was the best-performing European equity sector, helped by a 2.7 percent rise in Vodafone. Traders cited fresh speculation that U.S. group Verizon could buy Vodafone's stake in Verizon Wireless.
Arnaud Scarpaci, fund manager at Paris-based Montaigne Capital, said he expected any pullback on European stock markets to be short-lived before equities rebounded.
Investor appetite towards equities and the euro zone remains robust after pledges made during the second half of last year by the European Central Bank (ECB) to take new steps to tackle the euro zone's sovereign debt crisis.
Exane BNP Paribas analysts said they expected European equities to outperform U.S. equities this year and for European shares to have the potential of offering double-digit total returns in 2013.