Europe Stocks Inch Up, Siemens Calms Results Fears

Auto stocks were also on the upside, with BMW up 2 percent and Daimler up 3.1 percent.

European stocks inched higher on Tuesday, as Siemens calmed investors' fears over corporate results, offsetting grim U.S. consumer confidence data.

The German industrial conglomerate stuck to its full-year profit outlook, sending its stock up 2.8 percent and boosting industrial shares such as Alstom's, which gained 4.2 percent.

The FTSEurofirst 300 index of top European shares staged a late rally and closed 0.1 percent higher at 785.64 points. The benchmark index soared 3.2 percent on Monday.

"Short-term rallies are to be expected, but stocks will certainly revisit their historical lows before we get an L-shaped recovery, with anaemic growth for a while," said Pierre Sabatier, head of strategy at Pythagore Investment, in Paris.

"More forecast downgrades are to be expected. Typically, in a recession, the margin of error of analysts explodes. Their estimates are usually backwards-looking," he said.

Stocks had fallen more than 1 percent in afternoon trade after data showed U.S. consumer confidence fell to a record low in January, hit by the ongoing housing slump and bleak job market, fuelling fears over the outlook for the world's biggest economy.

The Conference Board, an industry group, said its sentiment index fell to 37.7 from a revised 38.6 in December, confounding forecasts for a small uptick.

Recently hammered banks added to their previous session's recovery, with Royal Bank of Scotland up 8.3 percent, Credit Agricole up 3.2 percent, Bank of Ireland up 7.7 percent, and BBVA up 2.8 percent.

Despite the two-day rally, the DJ Stoxx banking index is still down 16 percent this year. The FTSEurofirst 300 is down 5.6 percent in 2009.

Auto stocks, beaten down over the past few weeks, were also on the rise on Tuesday, with BMW up 2 percent, Daimler up 3.1 percent, and Peugeot up 2.6 percent.

COLLAPSING DEMAND

Pharmaceutical shares, which have been outperforming the market this month, were among the biggest losers, with AstraZeneca down 3.9 percent, Roche down 2.4 percent, and Sanofi-Aventis down 2.7 percent.

Around Europe, the UK's FTSE 100 index dropped 0.4 percent, hit by the profit taking on big pharma stocks as well as a drop in a number of heavyweight mining shares such as Xtrata, which fell along with metals prices on demand worries.

Xtrata shed 4.9 percent, and Anglo American lost 1.3 percent.

Germany's DAX index fell 0.08 percent and France's CAC 40 was 0.03 percent lower.

Shares in chemical companies lost ground, dragged by a downbeat note from J.P. Morgan, citing potential further earnings risk from progressive price erosion.

"Collapsing demand in a number of key end markets will, we estimate, trigger average volume losses in fiscal 2009 of 6.3 percent across the sector. We expect most of this contraction will be felt in the first half of the year, with those most exposed losing between 8 percent and 10 percent of volumes during 2009," J.P.Morgan analysts wrote.