European shares bounce back

London - European shares rose on Tuesday on some strong earnings reports and signs of improved cooperation from Ukraine's pro-Russian rebels over the Malaysian Airlines plane shot down four days ago.

By 16:40, the FTSEurofirst 300 index of top European shares was 1.3% higher at 1 373.32 points after falling 0.5% in the previous session.

The planned handover of flight MH17's black boxes and reports by international investigators of improved access to its wreckage came as European Union foreign ministers threatened Russia with harsher sanctions for its support for the rebellion.

Tougher talk may not be matched by much action, however, after France's president signalled the disputed delivery of a warship to Moscow would go ahead.

"Europe is still in a wait and see attitude and we don't see an immediate escalation in tension and further sanctions against Russia from the European Union," said Gerhard Schwarz, head of equity strategy at Baader Bank in Munich.

"But given the tragic loss of life, there will be some further sanctions down the road and this certainly is not helpful for the global recovery."

The prospect of harsher sanctions on Russia, combined with Israel's escalating ground offensive in Gaza, have weighed on equities and other risk assets in the past week and traders expected the market to remain jittery.

The market on Tuesday was also supported by some positive earnings reports.

ARM Holdings, which sells blueprints for chip designs, topped the gainers' list on the FTSEurofirst 300. Its shares surged 4.6% after the Cambridge-based firm posted a 9% rise in second-quarter profit.

"A solid start to the earnings season and improving risk appetite are helping to drive the equity market higher," HSBC equity strategist Robert Parkes said.

"We are positive on the outlook for corporate earnings in Europe and believe that earnings are going to surprise on the upside."

Among other sharp movers, Actelion, Europe's largest biotech company, rose 3.7% after it hiked its 2014 profit forecast for the second time this year.

While the firm's chief executive said his strategy to stay independent was supported by shareholders, traders speculated on possible bids from larger firms such as AstraZeneca, Roche, GlaxoSmithKline or Novartis.

"Actelion is the answer to AstraZeneca's chronic pipeline shortage, GlaxoSmithKline's need for expansion and would be an easy morsel for Roche or Novartis to digest," Hobart Capital Markets trader Justin Haque said.

Elsewhere corporate updates were less upbeat, with French media group Publicis Group warning it would be "very difficult" to meet its annual target of 4% organic sales growth. Its shares fell 4.6 percent, the worst performer on the FTSEurofirst 300 index.