European Shares Rally for Second Day

European shares were on track for their biggest two-day gain since April on Wednesday, after a month-long downward trend, thanks to robust U.S. data.

U.S. durable goods orders, new home sales and consumer confidence all came in better than expected on Tuesday, offering some reassurance that the world's biggest economy may be strong enough to cope if the Federal Reserve scales back its stimulus programme in coming months as planned.

There was also some reassurance from China, where a central bank pledge to prevent any lasting credit crunch helped calm financial markets.

That helped the FTSEurofirst 300 index gain 1.6 percent to 1,148.56 points by 1002 GMT, adding to the previous day's 1.2 percent rise and trimming its fall from May's 5-year peak to less than 9 percent.

"The move down was about a very complacent market in terms of risk metrics ... We have been chasing our tails in terms of bringing risk levels to normalisation, and I think that has now occurred," said Steen Jakobsen, CIO at Saxo Bank.

"I am myself personally long the market and risk for the first time in two months based on underlying data in Europe and the U.S. improving combined with the fact that we had a clean out. I think after this sell-off we are in for a correction back up over the next month or two."

The move higher helped European indexes rise above some technical resistance levels, with EuroSTOXX 50 breaking above the 23.6 percent Fibonacci retracement of the past month's fall to trade 2 percent higher at 2,594.90 points.

However, technical analysts remained cautious about the market, with the EuroSTOXX 50 chart still showing a downside gap between 2,678.03 and 2,651.81 points, which opened up last week.

"Bounces are likely but should be short-lived," said David Furcajg, technical analyst at 3rd Wave Consult.

"A risk of a new downside move towards the 2,450 points support level and 50 percent retracement of the June-2012/June-2013 up-leg is the most likely scenario."

Among individual stocks, Belgian retailer Colruyt was a top gainer, up 8 percent after posting bigger-than expected annual profit and raising its dividend.

Basic resources was the only loser, down 0.4 percent in the face of weak metals prices and persistent negative analyst comment, with Credit Suisse the latest bank to cut price targets.