European stocks ended at a five-month closing high on Tuesday after strong manufacturing data from the United States and China boosted investor confidence and helped shift attention away from the euro zone.

The FTSEurofirst 300 <.FTEU3> index of top European shares rose 1.6 percent to 1,028.00 points, its highest close since early August, on volume that was two thirds of the 90-day average.

The STOXX Europe 600 Basic Resources Index <.SXPP> jumped 5.3 percent, as copper prices hit three-week highs after expansion in manufacturing activity in the United States and China boosted hopes for stronger metals demand.

Heavyweights to gain on Tuesday included BHP Billiton and Rio Tinto , up 6.2 percent and 6.4 percent respectively.

U.S. data will continue to point to some kind of recovery, said David Coombs, fund manager at Rathbone Brothers, which has 15.2 billion pounds under management.

This would continue to boost U.S. stocks, though European stocks with Asian and U.S. exposure might also gain, he said, adding: It is more of the same, referring to last year when U.S. stocks outperformed with the S&P 500 <.SPX> finishing flat while European shares <.FTEU3> lost 11 percent.

We have been pushing our (Rathbone's) exposure to the States higher, at the expense of Europe.

Other upbeat data included U.S. construction spending in November surging to a near 1-1/2 year high, and unemployment in Germany, Europe's biggest economy, falling more than expected in December. The jobless rate fell to the lowest level since the unification of Germany two decades ago.

Across Europe, Britain's FTSE 100 <.FTSE> rose 2.3 percent, to some extent catching up with gains elsewhere in Europe on Monday when London markets were closed.

Germany's DAX <.GDAXI> gained 1.5 percent. The auto sector <.SXAP>, packed with German heavyweights, rose 3 percent. Apart from the wider data that was positive for cyclical stocks, German new car registrations rose 6.1 percent in December, according to motor vehicle authority KBA, bucking a trend of falling sales in western Europe.


The pan-European index <.FTEU3> finished at its high for the day and just below its 200-day moving average at 1,028.13.

The index's 14-day relative strength index has risen to 68, with values above 70 indicating that it is 'overbought'.

Bill McNamara, technical analyst at Charles Stanley was not optimistic about the prospects for further progression.

Any break above (about 1,030) would be predicated on a significant development in the euro zone and, if that happens, further advances are possible. That said, going out on a limb and betting that such a solution will be found seems somewhat unwise at this stage, he said.

In the worst-case scenario, one or more countries exit the euro and the whole region slides into deep recession, sending this index back to revisit the lows from 2009, at around 660.

Europe will remain the focus of markets through at least the first quarter of 2012, JP Morgan Asset Management said in a note in which it continued to favour a defensive stance in European equities, targeting large market capitalisations with good dividend yields.

If the theme for last year was 'muddle through', this year will be 'grind through', as the slow slog of budget cutting and reform dominates. Sceptical investors will need to see tenacity and commitment from governments before they return to buying non-risk-free sovereign debt, it said.

Earnings and accompanying statements will also be a major focus for investors in the coming days, with aluminium company Alcoa set to kick off the fourth-quarter U.S. reporting season on Monday.

Among individual shares, Afren rose 20 percent, in volumes more than three times the 30-day average, after the Africa-focused energy exploration firm issued an upbeat production report on Monday, when the London market was closed.

(Additional reporting by Blaise Robinson; Charts by Vincent Flasseur; Editing by Dan Lalor)