London (AFP) - Europe's main stock markets rose on Tuesday, extending the previous day's surge as fears about the Ukraine crisis eased and fuelled optimism ahead of a speech by the head of the US central bank this week.
Frankfurt's main DAX index added 0.96 percent compared with Monday's close to end the day at 9,334.28.
London's benchmark FTSE 100 gained 0.56 percent at 6,779.31 points, while in Paris the CAC 40 rose 0.56 percent to 4,254.45 points.
On the foreign exchange market, the euro fell against the dollar but rose versus the British pound.
European stock markets had rebounded sharply on Monday on easing investor concerns over the unrest in east Ukraine and Iraq, while across the Atlantic, the Nasdaq 100 hit its highest level in 14 years.
"It's been another day of cheer for equity markets as the geopolitical situation remains in check and traders continue with a bullish mindset," said Tony Cross, a market analyst at Trustnet Direct.
Traders were looking ahead to a speech on Friday by Federal Reserve chief Janet Yellen for any hint of a change to the US central bank's interest rate plans.
Last month, Yellen said that the Fed would hold its near-zero interest rate policy until the US economy strengthened, but may raise rates if the jobs market continues to improve.
Traders said tame US inflation, which rose a 0.1 percent in July despite strong gains in food costs, according to official data, had left the door open for the Fed to keep rates low.
US stocks also pushed higher Tuesday, supported by strong housing construction data and a solid earnings report from retailer Home Depot.
In mid-afternoon deals, the Dow Jones Industrial Average gained 0.40 percent to 16,906.12.
The broad-based S&P 500 gained 0.37 percent to 1,979.11, while the tech-rich Nasdaq Composite Index 0.21 percent to 4,517.87.
- BHP Billiton splits -
The top corporate story was the world's biggest miner BHP Billiton, which posted a 23.2-percent jump in annual net profit and said it would spin off non-core assets to cut costs and boost output.
Shares slumped 4.93 percent to 1,965 pence in London as it unveiled plans to demerge parts of its business to focus exclusively on its core operations: iron ore, copper, petroleum, coal and potash.
Traders said rumours of the separation had previously supported the share price and that Tuesday's drop was down to profit-taking.
"The stock has now given back more than it gained when news of the deal first broke," said Cross.
Shares in Maersk jumped 4.89 percent after the world's largest container-shipping line raised its full-year profit forecast.
Imperial Tobacco, which makes Davidoff and Gauloises cigarettes, gained 2.34 percent after reporting a smaller fall in sales than expected by analysts.
Meanwhile falling oil prices, which hit their lowest point since June 2013, and the "perceived upturn in global stability is lending support to the airlines," said Cross.
Easyjet shares added 2.61 percent in London while Lufthansa closed up 2.10 percent in Frankfurt.
On foreign exchange markets, the euro fell to $1.3317 from $1.3363 late on Monday in New York.
The European single currency increased to 80.12 pence from 79.88 pence on Monday, while the pound slid to $1.6620 from $1.6728.
The pound came under pressure on news of a dip in inflation in Britain, which eased the pressure on the Bank of England to raise its main interest rate from the current record-low of 0.50 percent.
Markets still expect the BoE to raise borrowing costs in the first half of 2015, if not before, as Britain's economy is achieving solid growth in comparison to many of its eurozone neighbours.
Asian stocks rose sharply on Tuesday, with Tokyo's Nikkei 225 index to closing up 0.83 percent. The Japanese benchmark index benefited also from a weaker yen, which helps to boost Japanese companies' exports.
Elsewhere on Tuesday, the price of gold dipped to $1,296.75 an ounce from $1,296.75 on Monday on the London Bullion Market.