RTTNews - The European markets rose for the fourth day on Tuesday, as banking stocks rallied on optimism of a recovery in the sector and mining stocks gained on firmer metals prices.

In economic news, the U.S. Commerce Department said housing starts dropped 12.8% in April to an annual rate of 458,000. The result for March was revised to a rate of 525,000 units, a decline of 8.5% from the previous month. Analysts had expected starts to rise to a pace of 540,000 units from the rate of 510,000 units that was originally reported for March.

The Mannheim-based Centre for European Economic Research, or ZEW, said its economic sentiment indicator for Germany rose to 31.1 in May, the highest since June 2006, from 13 in April, while the forecast was for an increase to 20.

The London interbank offered rate, or Libor, for three- month loans in dollars dropped four basis points to 75 basis points today, the biggest two-day decline in more than four months, the British Bankers' Association said.

Crude for June delivery rose $0.05 to $59.08 a barrel on the New York Mercantile Exchange, by the time the European markets closed, after hitting as high as $60.48 a barrel earlier in the session.

The FTSEurofirst 300 index of pan-European blue chips closed 1.42% higher at 872.09 points, while the narrower DJ Stoxx 50 index rose 1.21% to 2,132.80 points.

Around Europe, the U.K.'s FTSE 100 index rose 0.81% to 4,482.25, while France's CAC 40 index surged up 0.91% to 3,274.96 and Germany's DAX index climbed 2.22% to 4,959.62.

Banks were among the top gainers. HSBC, Europe's largest bank, rose 3.5%, while BNP Paribas, France's largest bank, surged up 2.6% and Deutsche Bank, Germany's biggest lender, climbed 6.4%. Spain's Banco Santander gained 3.45 and Italy's UniCredit added 4.5%.

Mining stocks gained after metals prices climbed. BHP Billiton, the world's biggest miner, rose 3.2%, while Anglo American, the second biggest, surged up 7.3% and Rio Tinto, the third biggest, added 3.6%.

Infineon, Europe's second biggest chipmaker rallied 14% after it successfully sold convertible bonds yesterday, prompting Cazenove to upgraded the stock to outperform from underperform.

On the other hand, Marks & Spencer, Britain's biggest clothing retailer, dropped 8.1% after the company cut its dividend as full year profit fell 38%.

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