European stocks rose on Tuesday following five consecutive daily losses, as oil prices eased off recent lows ahead of the Federal Reserve’s policy meeting this week.
The pan-European STOXX 600 Index climbed 2.8% after plunging more than 6% over the previous five sessions.
All of Europe’s major averages rebounded on Tuesday, with London’s FTSE 100 Index gaining nearly 2%. Stocks in Germany also rose, sending the DAX Index soaring more than 300 points or 3%. The CAC 40 Index in Paris and IBEX 35 in Madrid each rose more than 3%.
European stocks were lifted by improving risk sentiment on Wall Street after US stocks opened the week in positive territory. US markets continued to rally on Tuesday, with the Dow Jones Industrial Average climbing more than 200 points in intraday trade. The S&P 500 Index was also up more than 1%. Despite the gains, both major averages are trading in negative territory for 2015.
Oil prices rebounded on Tuesday, but remained near seven-year lows ahead of key US inventory data later in the week. The West Texas Intermediate (WTI) benchmark for US crude climbed 55 cents or 1.5% to $38.86 a barrel on the New York Mercantile Exchange. International benchmark Brent crude rose 63 cents or 1.7% to $38.55 a barrel on ICE Futures Europe.
The US dollar also firmed as investors turned their attention to this week’s Federal Reserve policy meeting on Wednesday and Thursday. The dollar index, a weighted average of the US currency against a basket of six rivals, climbed 0.3% to 97.93.
The EUR/USD exchange rate that has been unusually strong over the past week fell back below the psychological 1.10 level. The pair settled down 0.4% at 1.0955.
The dollar is expected to firm on Thursday should the Fed raise interest rates as expected. A rate hike could also pressure global stocks, which are unlikely to regain their 2015 highs this year.
2016 is forecast to be a tough year for the stock markets. According to multinational investment bank Goldman Sachs, US stocks will tread water again next year, as tighter Fed policy, a strong dollar and uneven global growth weigh on corporate earnings. Including dividends, total returns in 2016 are expected to total 3%, Goldman analysts wrote last month.