The European markets rose for the second day on Wednesday, as better-than-expected U.S. housing and manufacturing data signaled a recovery in the world's largest economy later in the year, brining cheers to investors.

The National Association of Realtors in the U.S. said its index of pending home sales rose 2.1% to 82.1 in February from a reading of 80.4 in January. The increase by the index came as a surprise to economists, who had expected the reading to come in unchanged compared to the previous month.

The Institute for Supply Management said its index of activity in the manufacturing sector edged up to 36.3 in March from 35.8 in February, with a reading below 50 indicating a contraction in the sector. Economists had been expecting the index to come in at 36.0.

Crude for May delivery fell $2.00 to $47.66 a barrel on the New York Mercantile Exchange, by the time the European markets closed, as the U.S. Energy Department reported that crude inventories continued to rise last week and gasoline stockpiles jumped despite predictions for a steep drop.

The FTSEurofirst 300 index of pan-European blue chips closed 1.56% higher at 745.14 points, while the narrower DJ Stoxx 50 index rose 1.11% to 1,836.14 points.

Around Europe, the U.K.'s FTSE 100 index rose 0.75% to 3,955.61, while France's CAC 40 index climbed 1.15% to 2,839.61 and Germany's DAX index surged up 1.13% to 4,131.07.

Shares of construction and building materials companies were among the top gainers. Vinci, the world's largest construction company, rose 3.3%, while Sacyr, a Spanish construction company, climbed 7.4% and Bilfinger Berger, Germany's second largest construction company, surged up 6.7%.

CRH, the world's second-biggest maker and distributor of building materials, jumped 7.2% and Saint Gobain, the world's largest glassmaker, added 2.7%.

Economy sensitive banking stocks also gained, helped by upbeat U.S. data. BNP Paribas, France's largest bank, rose 5.7%, while Barclays, Britain's third biggest lender, surged up 6.1% and ING, the largest Dutch financial services company, climbed 8.4%. Credit Suisse, Switzerland's second largest bank, advanced 5.9%.

Vodafone, the world's largest mobile phone company, climbed 4.4% after Goldman Sachs upgraded the stock to conviction buy from neutral and Morgan Stanley raised its recommendation on Vodafone to overweight' from equal-weight.

On the other hand, heavily weighted oil stock slipped after crude oil prices declined. BP, Europe's biggest oil company, fell 2.2%, while Royal/Dutch Shell, the second biggest, dropped 2.5% and Total, the third biggest, dipped 1.3%.

Lafarge, the world's biggest cement maker, lost 5.8% after the company launched a ?1.5 billion rights issue at a deep discount.

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