MILAN (Reuters) - European equities gained on Tuesday after early sharp losses, with commodity stocks rebounding after oil rose towards $31 on hopes of a deal to tackle a supply glut and metals prices gaining ground on speculative buying.
The STOXX Europe 600 Oil and Gas index rose 2.5 percent after oil prices rose on expectations that OPEC and non-OPEC producers may be edging closer to a deal. The Organization of the Petroleum Exporting Countries is making renewed calls for rival producers to cut supply alongside its members. [O/R]
"Markets have recovered with a rise in oil prices and that indicates that the two are still strongly correlated. Today's reversal could be the first step towards a short-term improvement in equity prices," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
The European basic resources index rose more than 4 percent after copper and zinc prices hit multi-week peaks as speculators bought back short positions ahead of a holiday break in top metals consumer China. [MET/L]
Shares in Anglo American rose 11.7 percent, in line with a rally in the market and also after it reported that rough diamond sales improved significantly this year.
Rio Tinto, Glencore and Fresnillo jumped 4.9-7.7 percent, helping the pan-European FTSEurofirst 300 to provisionally close 1 percent higher at 1,336.63 points after touching a low of 1,296.66 earlier in the day. The index is down about 9 percent since the start of the year.
Global stocks have had a rocky start to 2016 due to concerns over slowing growth in China and plunging crude prices, and investors have struggled to find safe haven investments.
There was a brief reversal in the sell-off last week when European Central Bank chief Mario Draghi hinted at more stimulus, but worries have resurfaced over the central bank's ability to prop up the economy.
"There is massive doubt if any ECB action will be able not only to boost growth but also fight disinflation with both a slowing economy in China and lower oil prices likely to lead inflation even lower," City of London trader Markus Huber said.
Among other movers, Siemens rose 8.6 percent after Europe's biggest industrial group raised its full-year earnings forecast on strong first-quarter results.
"We were most surprised by the strength in Healthcare with 8 percent order and 11 percent organic sales growth, while the slowdown in the short-cycle Digital Factory impacted margins as expected," wrote Barclays, which rates Siemens "underweight".
Additional reporting by Atul Prakash; Editing by Gareth Jones