European shares rise on earnings optimism, banks weigh

(Fixes typographical error in second paragraph to make it "by miners" instead of "my miners")

By Amruta Khandekar and Shristi Achar A

(Reuters) -European shares reversed early declines to gain on Tuesday as robust earnings from the region and the U.S. outweighed concerns about downbeat economic data in the euro zone, while bank shares underperformed.

The pan-European STOXX 600 index ended 0.4% higher, led by miners as metal prices ticked higher. [MET/L]

U.S. stocks rose as a sell-off in U.S. Treasuries eased, while upbeat corporate forecasts boosted optimism about corporate America's health in the face of a slowing economy and higher inflation. [.N]

"The outlook for earnings in the U.S., with some of the tech names reporting, that optimism probably drove a few things higher (in Europe)," said Michael Field, European equity strategist at Morningstar.

Lenders were however a drag, down 1.0% as Barclays fell 6.5% after the British lender hinted at major cost cutting later this year and warned competition for savers' money was eating into its margins.

Adding to the sector's woes, Spanish bank stocks fell on uncertainty over a potential profit hit after calls to boost a windfall tax under a coalition government deal between Spain's leftist platform Sumar and the Socialist Party.

The news weighed on Spain's benchmark IBEX index, down 0.2% and a laggard among regional markets.

Meanwhile, data showed the euro zone Composite Purchasing Managers' Index (PMI) fell to a near three-year low in October, while business activity in Germany contracted for a fourth straight month, spurring concerns about a recession.

"We're seeing the impact of increased borrowing costs in the fact that business activity in Germany has contracted again, so (there's) a real expectation that a recession is well underway, certainly in that part of the euro zone," said Danni Hewson, head of financial analysis at AJ Bell.

While investors are expecting global central banks to refrain from raising interest rates further, they are awaiting key U.S. economic growth data later in the week to gauge how long the Federal Reserve could hold rates.

Among earnings, Hermes rose 2.8% as the Birkin bag maker beat third-quarter sales estimates, defying a slowdown in the broader luxury sector.

Puma shares rose 7.6% after the German sportswear brand stood by its full-year profit forecast despite a drop in third-quarter earnings.

The personal and household goods sector including both those stocks added 1.2%.

Logitech International jumped 10.2% to the top of STOXX 600 after lifting its full-year guidance.

IT services firm Softcat slumped 11.9% on a decrease in its full-year revenue.

(Reporting by Amruta Khandekarand Shristi Achar A; Editing by Janane Venkatraman, Varun H K and Jonathan Oatis)