Europe gains on U.S. data

European markets extended their gains after U.S. durable goods orders surged last month

LONDON, England (CNN) -- European markets closed higher on Tuesday, led by insurance stocks, after getting a lift from a report showing demand for U.S. durable goods jumped in July.

The Commerce Department reported that orders for goods made to last three years or longer, such as cars and computers, rose 8.7 percent to $179.7 billion following a revised 4.5 percent drop in June. (Full story)

However, European bourses dipped temporarily as Wall Street fell back in early trading after a disappointing U.S. consumer confidence report took the shine off the good news about durable goods.

The Conference Board said its confidence index fell to a nine-month low in August, pointing to weaker-than-expected consumer spending. (Full story)

London's FTSE 100 rose 1.4 percent to 4,449.7 and the CAC 40 blue chip index in Paris added 2.9 percent to 3,570.5, while Frankfurt's electronically traded Xetra Dax was up 2.2 percent to 3,865.97 in late trading (the German market was set to close at 1800 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was up 1.9 percent to 1000.95, with the insurance, oil and gas, and mining sub-sectors leading gains.

The surprisingly strong U.S. durable goods number helped lift markets, which had already been given a boost by higher oil prices.

"This [data] is a very good recovery from the downturn we saw in June and is bound to put fears of double-dip recession back on hold," Bear Stearns economist David Brown told Reuters.

"It suggests businesses are beginning to make initial forays into reinvestment."

Insurance stocks shrugged of more disappointing news from the sector to lead Eurotop 300 higher. Winterthur, the insurance arm of financial conglomerate Credit Suisse Group, said its hidden reserves had dropped to 900 million Swiss francs ($594 million) at the end of June from a peak of 3.9 billion in 1997. (Full story)

Credit Suisse, Switzerland's second-biggest bank, rose 2.5 percent to 37.30 Swiss francs and Zurich Financial gained 4.9 percent to 182.50 francs on continued talk the Swiss insurer is a takeover target.

Technology stocks made up for weak session on Monday after the tech-laden Nasdaq had a strong run. Nokia, the world's biggest mobile phone maker, added 2.2 percent to 14.53 euros, Europe's biggest telecom equipment maker Alcatel (PCGE) notched up a 5.5 percent gain to 5.90 euros, while German telecom powerhouse Siemens (FSIE) advanced 4.5 percent to 51.62 euros in late trading.

Oil shares were also higher amid concerns the U.S. may take action against Iraq. U.S. Vice President Dick Cheney laid out the case for a pre-emptive strike against Iraq on Monday, saying the U.S. cannot wait until Iraq obtains nuclear weapons.

"The risk of inaction is far greater than the risk of action" he said. (Full Story)

Concerns that an attack on Iraq could curb oil supplies from the Middle East spurred Brent Crude futures for October to rise 74 cents to $27.73 a barrel in afternoon London trading.

Royal Dutch, which owns 60 percent of the world's third-biggest oil company Royal Dutch/Shell, rose 3.1 percent to 48.15 euros in Amsterdam. Shell Transport & Trading (SHEL), which owns the remainder, added 2 percent to 463.75 pence in London.

BP (BP), Europe's biggest oil company, rose 2.8 percent to 543 pence and France rival TotalFinaElf (PFP) also gained 3.4 percent to 150 euros.

The AEX index in Amsterdam rose 4 percent and Milan's MIB30 index added 2.3 percent, while the SMI in Zurich climbed 1.2 percent.

In the U.S. on Tuesday, initial gains were erased after a worse-than-expected consumer confidence report reversed the good cheer of an earlier durable goods data.

In mid-morning trading, the Dow Jones industrial average was down 35.61 points to 8,883.76, while the Nasdaq composite index lost 20.30 points to 1,370.11. The Standard & Poor's 500 index fell 6.94 points to 941.99.