European stocks climbed yesterday afternoon, lifted by strong insurance stocks such as Prudential and Munich Re and after solid manufacturing data raised hopes that corporate earnings may rise.
Further support came from investors returning from the summer holidays and dipping in the market again.
"Some of them have discovered that markets have had a decent run (in August), and now they have to spice up their portfolios," said Sal. Oppenheim equities strategist Matthias Joerss.
European benchmark indices have gained over 30 per cent from six-year lows in mid-March, buoyed by expectations that a global economic recovery will boost corporate profits.
"At the start of last month investors doubted the US economy would react to tax cuts and lower interest rates, but just a month later that scepticism has disappeared," said Roger Hornett, chief executive and global strategist at Gilissen Securities in London.
Markets in the US are closed for the Labour Day holiday, and activity was muted in Europe.
By 1303 GMT, the FTSE Eurotop 300 index was up 1.31 per cent at 907 points, while the DJ Euro Stoxx 50 index gained 1.5 per cent to 2,594 points.
Volume on the benchmark FTSE Eurotop 300 index was €1.43 billion and advancers outnumbered falling issues by a ratio of six to one.
Around Europe, London's FTSE 100 was up 1.11 per cent, France's CAC 40 added 1.47 per cent and Zurich's Swiss market rose 1.7 per cent. Frankfurt's DAX jumped 2.2 per cent.
Euro zone manufacturers reported their first rise in new orders in six months in August, according to a survey of around 3,000 companies, raising hopes the region is over the worst of its economic downturn.
A rise in the Reuters Eurozone Purchasing Managers' Index showed that the sector moved closer to growth as manufacturing output stabilised, job cuts slowed and new orders grew.
"The data is in line with expectations and signals... that the euro zone economy, at least on the industrial side, is turning for the better," said Bank of America's Lorenzo Codogno.
Chemicals, insurers and automobiles were the best performers, each gaining around two per cent.
Heavily indebted France Telecom fell 3.7 per cent after it said it would buy the 13.7 per cent of its mobile phone subsidiary Orange that it did not already own in a deal valued at €7.1 billion. Orange rose 13 per cent.
British drugmaker AstraZeneca rose 2.1 per cent after the firm's blood pressure drug Atacand was shown on Sunday to help cut deaths and serious illness in heart-failure patients.
The DJ Stoxx insurance sector rose two per cent after investment bank Morgan Stanley raised its stance on the sector to "in-line" from "cautious" and upgraded Britain's Prudential and Germany's Munich Re.
"We are fundamentally more positive on the insurance industry, especially in regards to capital adequacy," Morgan Stanley analysts wrote in a research note.
Prudential shares was Europe's top blue-chip gainer, rising 4.35 per cent while Munich Re rose 3.54 per cent.