European stocks rally sharply amid China, Syria optimism; Dax up 1.8%

European stock markets rallied sharply on Tuesday, as concerns over a U.S. military strike against Syria eased and upbeat Chinese economic data fuelled risk appetite

During European afternoon trade, the EURO STOXX 50 jumped 1.6%, France’s CAC 40 rose 1.55%, while Germany’s DAX 30 rallied 1.8%. 

Market sentiment was boosted after reports on industrial production and retail sales from China added to signs that the world’s second largest economy is recovering from a slowdown.

Data released on Tuesday showed that Chinese retail sales rose unexpectedly in August, while Chinese industrial production rose more than forecast last month.

Investor confidence was also bolstered after U.S. President Barack Obama said he would put plans for a military strike against Syria on hold if the country agrees to a Russian proposal to place its chemical weapons under international control.

Obama will address the U.S. public on Syria on Tuesday after U.S markets have closed. 

Financial stocks were broadly higher, as Societe Generale rallied 4.2%, while Germany's Deutsche Bank climbed 2.7%. 

Italian lenders also contributed to gains, despite data showing that the recession in Italy is deeper than had been previously thought.

The economy contracted by 0.3% in the second quarter, worse than the initial estimate of a 0.2% contraction, bringing the annualized rate of contraction to 2.1% from the initial estimate for a  2% contraction. 

Intesa Sanpaolo and Unicredit rallied 2% and 1.4% respectively. 

Shares of carmakers were higher as industry players met at the Frankfurt Motor Show. Volkswagen saw shares gain 3.9%, while Peugeot jumped 4.6%.

Elsewhere, in London, FTSE 100 rose 0.95% to hit a three-week high. 

Financial stocks were mostly higher, as shares in the Royal Bank of Scotland surged 4.7% and Barclays gained 2.3%, while Lloyds Banking Group climbed 2.9%. 

Meanwhile, mining stocks also contributed to gains. Glencore Xstrata and Rio Tinto advanced 3% and 2.6% respectively, while BHP Billiton tacked on 1.9%.

In the U.S., equity markets pointed to a higher open. The Dow Jones Industrial Average futures pointed to a 0.5% gain, S&P 500 futures signaled a 0.6% rise, while the Nasdaq 100 futures indicated a 0.65% increase. 

Investors continued to speculate over the timing of the Federal Reserve’s widely expected reduction in monthly bond purchases following last week’s weaker-than-forecast U.S. jobs report.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of global equities.