European shares rallied on Tuesday as fund managers said strong earnings would support markets in the short term, overshadowing economic risks, with LVMH and Burberry results' beating forecasts.
By 0837 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.4 percent at 1,116.73 points recovering from a sell-off in the previous session when Standard & Poor revised its credit outlook on the United States to negative.
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"We are going into earnings season and we think in the near term it is reasonably supportive," James Buckley, head of European equities at Baring Asset Management said, which has 30 billion pounds ($48.68 billion) of assets under management.
"We favour stocks which are exposed to the global economy and continue to favour luxury good companies. LVMH, which we own, had good results this morning."
Luxury group companies were in demand, with the STOXX Europe 600 Personal and Household Goods index .SXQP index up 1.5 percent.
LVMH, the world's biggest luxury group, gained 3.9 percent after its first-quarter sales also beat analysts' expectations, while British firm Burberry jumped 7.3 percent after fourth-quarter underlying sales beat forecasts. [ID:nLDE73C2CI] [ID:nLDE73I08R]
The industrial sector was also in demand on strong earnings news.
Manufacturing bellwether SKF, the world's top bearings maker, jumped 5.1 percent after it posted forecast beating first-quarter earnings, while Zodiac Aerospace gained 3.6 percent after it raised its full-year margin target. [ID:nLDE73I07V] [ID:nLDE73H1XV] Fund managers said the sell-off after S&P revision of the United States had been overdone, with Wall Street ending although down, off its lows on Monday.
"The market should be supported at these levels despite the global macro economic concerns. The U.S. market closed well off its lows, so the response in the state was fairly sanguine," Buckley said.