European shares rose in morning trade on Tuesday after a raft of Chinese data suggested that growth in the world's second-biggest economy was not slowing down too quickly, prompting investors to buy riskier assets.
The Euro STOXX 50 volatility index, one of Europe's main barometers of market sentiment, fell more than 5 percent, suggesting an increase in investors' appetite for equities.
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Nokia, up 2.3 percent, led tech shares higher after the company said it had ended a legal battle with Apple, which will pay an undisclosed one-off fee and ongoing royalties. The European sector index rose 1.5 percent.
At 0831 GMT, the FTSEurofirst 300 index of top European shares was up 0.8 percent at 1,100.66 points on data from China, which stayed resilient during the credit crisis and had helped in pulling the world economy out of recession.
"A measured slowdown in the Chinese economy is just what investors want, with today's figures providing some hope that this is just what is unfolding," said Keith Bowman, equity analyst at Hargreaves Lansdown.
"Nonetheless, events in Europe remain front and centre. The euro zone debt crisis appears to be reaching a critical point."
Figures showed China's industrial output in May beat market expectations with a 13.3 percent rise from a year ago, while May retail sales rose 16.9 percent, compared with expectations for an increase of 17.0 percent.
China's consumer prices advanced 5.5 percent in May, a shade faster than expected, prompting the country's central bank to raise bank reserve ratios for the ninth time since last October.
"It is clear that the state of the Chinese economy is very important for the region. Also economies are getting more and more dependant on Asian/Chinese growth," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.
"This does not mean that markets are out of the woods yet. Technically we were very much oversold, so the China story is the perfect excuse to get a little rally going. However, quite a bit of worries remain," he added.
The lingering concerns about the euro zone debt crisis stayed in the background, forcing investors to stay cautious. The bloc's policymakers remained divided over how to involve the private sector in Greece's next bailout package, which is expected to be finalised at a Brussels summit on June 23-24.
Standard & Poor's cut Greece's ratings by three notches with a negative outlook on Monday, saying the country is increasingly likely to restructure its debt in a way the ratings agency would consider a default.
Greek banks fell 0.7 percent, underperforming the European banking index, which was gained 1.1 percent. The country benchmark share index dropped 0.1 percent.
Miners were in demand as metals prices advanced on Chinese data. The European sector index rose 1.2 percent, while BHP Billiton gained 1.4 percent.
Despite recent declines, fund managers remained positive on the stock market's prospects going forward.
"In the longer term, equity markets offer superior returns compared to bonds and other asset classes because the earnings growth, which is available to them even in rocky economic times, is always a positive for investors," said Richard Greenwood, fund manager at Bedlam Asset Management.
Greenwood, whose company manages $700 million, said the healthcare sector was quite attractive because of its stable demand characteristics and the potential for earnings growth. (Editing by Hans Peters)