- UK, US inflation data in focus
- Ukraine, Iraq and Gaza closely watched
FTSE 100: 0.50%
CAC 40: 0.57%
FTSE MIB: 0.21%
IBEX 35: 0.61%
Stoxx 600: 0.59%
European stocks gained ahead of UK and US inflation data.
UK consumer prices may have risen 1.8% year-on-year in July after increasing 1.9% in June, according to forecasts ahead of Tuesday morning's report.
The Bank of England (BoE) continues to monitor to what degree the economy has improved enough to sustain an interest rate hike.
In the Bank of England's quarterly Inflation Report last Wednesday, the central bank said inflation is expected to remain close to its 2% target in the period ahead. However, during his press conference Governor Mark Carney said the Bank should be extra cautious in its approach given that wages remained weak.
Signs of improvement in the economy and the labour market had fuelled speculation that a first interest rate hike might come as soon as November. The BoE is said to be comfortable with raising rates in the first quarter of 2015.
The minutes from the latest Monetary Policy Committee meeting, released on Wednesday, may provide further clues on the timing of a rate increase.
The US also releases its consumer price inflation figures later on Tuesday, which are expected to reveal that the headline rate eased back from 2.1% in June to 2% in July.
However, the consumer price index (CPI) is not the Federal Reserve's preferred measure of inflation so the numbers should be taken with a pinch of salt, according to Alpari UK analyst Craig Erlam.
"US inflation, as measures by the CPI reading, is running very close to target [2%] which may soon increase the pressure on the Fed to hike interest rates earlier than it would like," he added.
"That said, certain members have recently suggested that the Fed would allow inflation to run a little over target in an attempt to tackle the problem of slack in the economy, something I imagine Yellen would be very on board with."
Meanwhile, geopolitical developments will continue to be under watch in the Ukraine, Iraq and Gaza. Global stocks bounced higher on Monday as tensions eased back in Ukraine and Iraq.
In corporate news, shipping company A.P. Moeller-Maersk rallied after raising its full-year profit forecast, citing higher freight volumes and lower costs.
BHP Billiton slumped after announcing plans to create an independent company comprising its aluminium, coal, manganese, nickel and silver assets.
The euro fell 0.07% to $1.3354.
Brent crude futures rose 0.27% to $101.88 per barrel, according to the ICE.