Europe's Markets Close Higher Tuesday on U.S. Housing Starts

(Reuters) - European shares rose on Tuesday in thin trade after a jump in U.S. housing starts, a strong reading of the German Ifo index and a solid Spanish debt auction boosted investor hopes about the global economic outlook.

The cyclical carmaking sector, which performance is dependent on strong economic growth, was the top performer, with the STOXX Europe 600 Automobiles & Parts index up 5 percent on the improved growth outlook.

On Tuesday, London's FTSE 100 closed up 55 points to 5,420, Germany's DAX surged 176 points to 5,847, and France's CAC 40 jumped 81 points to 3,055.

Markets are taking a favourable view of the economic data as this could mean the outlook for company earnings is not so bad, Mike Lenhoff, chief strategist at Brewin Dolphin, said.

The Spanish auction was helpful and the fall in bond yields has translated into investors buying riskier assets, but who knows what is going to happen next. We are not going to change our defensive stance in our portfolios.

The FTSEurofirst 300 index of top European shares provisionally closed up 1.9 percent at 975.27 points, but volume was low at 63.1 percent of its 90-day daily average.