Europe close: Most stocks higher as China market stabilises

European stocks outside of Italy rallied as China’s equity markets stabilised and investors welcomed a slate of positive earnings reports.

“A raft of positive corporate earnings this morning has delivered a boost for markets,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor.

“However, investors will still be keenly waiting for the Federal Reserve's statement this evening to see if there is any more clarity on whether interest rates will start to rise in September or move later in the year.”

The Federal Reserve is expected to announce at 1900 BST that it will keep interest rates at zero but the market will be looking for hints on the timing of an increase.

Ahead of the announcement, a report showed US pending home sales fell 1.8% in June, to the surprise of analysts who were projecting a 0.9% rise.

Meanwhile, Greece continued to be under watch as Prime Minister Alexis Tsipras admitted that the country may have to call an early election due to rebels within his Syriza party.

Speaking on local radio station Sto Kokkino on Wednesday, Tsipras said he may be forced to call an early election if he does not have a working parliamentary majority.

The Greek stock market is due to reopen this week following approval from the European Central Bank, having been closed since the end of last month.

The focus was, however, firmly on earnings.

Barclays was the standout gainer after it posted a 36% rise in first-half pre-tax profit to £1.44bn.

British American Tobacco rallied as investors welcomed a stronger-than-expected rise in first-half profit, although revenue for the period was dented by currency moves.

Hedge fund firm Man Group was also a high riser after its first-half profit beat analysts’ expectations as performance fees nearly doubled.

Tate & Lyle gained after a well-received first-quarter trading update in which the company said its performance was in line with expectations and stuck to its guidance for the full year.

Shares in oil giant Total rose after it posted a better-than-expected second-quarter profit on the back of increased refining margins and accelerated cost-cutting.

Elsewhere, French car maker Peugeot rallied after swinging to its first profit since 2011 on the back of higher prices, a positive product mix and a favourable currency impact.

Luxury-goods maker LVMH Moet Hennessy Louis Vuitton pushed up after posting its best earnings increase in three years.

On the downside, catering company Compass fell sharply. Although it posted a 6.8% rise in organic revenue for the third quarter, it warned that operating profit this year and the next would be dented by restructuring costs.