European shares at near two-week high amid UK fiscal plan optimism

European shares rose for the fourth straight session on Tuesday, building on the previous session's rally that was driven by Britain's historic reversal its fiscal plan, with investors keeping a watch on earnings to gauge the economic outlook.

The region-wide STOXX 600 index was up 0.9% by 0826 GMT, hitting a near two-week high, as investors snapped up beaten-down tech and bank stocks.

Shares of chipmakers, including ASML Holdings and BE Semiconductor, rose between 0.9% and 4% amid a risk-on sentiment in markets.

Adding to the buoyant mood was a report that the Bank of England was likely to delay the sale of billions of pounds of government bonds to encourage more stability in battered gilt markets.

"What has started now is a bit of a game. They (the UK government) are now going to see what is acceptable to markets and what is not," said Elwin de Groot, head of macro strategy at Rabobank Research.

"If you make that U-turn too extreme and basically embark on a trajectory of significant fiscal tightening, that could also do more more harm. So, I think the Chancellor has to find his way in between these extremes."

Investors also took comfort from a recent pullback in natural gas prices in Europe, which is battling an energy crisis amid growing risks of a recession.

"The market is not fully taking on board all the risks that we're still facing. The risk further out is that gas prices will still recover (in the winter)," said de Groot.

With central banks aggressively tightening monetary policy in the face of decades-high inflation, markets are parsing forecasts from companies to gauge the impact of macro pressures.

France's Publicis Groupe gained 3.8% after the world's third-biggest advertising group raised its full-year outlook for the second time this year.

Shares of Swiss drugmaker Roche fell 1.2% as its quarterly sales declined due to a slump in COVID-19 treatments and diagnostic testing.

Rio Tinto slipped 0.7% after it projected annual iron ore shipments at the lower end of its forecast amid weak global demand.