European Markets Surge Amid Positive Earnings Reports and Anticipated Fed Signals

European shares closed higher on Tuesday, led by positive earnings from major companies. The Federal Reserve's upcoming rate decision and its implications for monetary policy remained a focal point. Notable stock movers included Italy's Intesa Sanpaolo and Austria’s Raiffeisen Bank. The euro zone economy showed slight growth despite mixed data.

European shares saw gains on Tuesday, buoyed by strong earnings reports from various sectors. The Federal Reserve's anticipated rate decision and its potential impact on monetary policy were key market drivers.

The pan-European STOXX 600 index ended 0.5% higher, with the euro zone bank index climbing 1.2%. Italy's largest bank, Intesa Sanpaolo, surged 3.5% after revising its profit outlook upward and posting better-than-expected quarterly earnings. Meanwhile, Austria's Raiffeisen Bank International rose 3.7%, surpassing second-quarter profit estimates.

The construction and materials sector also performed well, with Spanish builder ACS increasing by over 4% after reporting an 8% rise in first-half net profit. Despite slightly better-than-expected growth in the euro zone economy for the three months to June, a series of pessimistic surveys painted a mixed outlook for the rest of the year. German economic data revealed contraction in the second quarter, emphasizing the continuing challenges faced by the euro zone's largest economy.

Investor attention remains on the Federal Reserve, which concludes its two-day policy meeting on Wednesday. Signals are anticipated that interest rates may be cut in September. The Bank of England is also set to announce its latest monetary policy decision this week.

In other stock highlights, Novo Nordisk gained 1.4% following a study that showed its diabetes drug Ozempic reduced smoking-related health complications in patients. Britain's St James's Place soared 24.8% after unveiling a plan to reduce costs and improve services. Poste Italiane advanced by 4.3% with a slightly raised profit outlook. On the downside, Diageo fell 5.1% after missing full-year profit expectations and cautioning of ongoing challenges.

(With inputs from agencies.)