Earnings cheer boosts European stocks ahead of Fed

European stock markets recovered Wednesday, helped by upbeat earnings reports across the region ahead of the latest economic update from the U.S. Federal Reserve.

The FTSE 100 index of leading British shares was up 34.03 points, or 0.7 percent, at 5,071.24 while Germany's DAX rose 78.24 points, or 1.5 percent, at 5,431.59. The CAC-40 in France was 45.89 points, or 1.3 percent, higher at 3,630.14.

Sentiment was buoyed by some forecast-busting earnings from the likes of British retailer Marks & Spencer PLC, French bank Societe Generale SA and German sportswear company Adidas AG.

Marks & Spencer shares rose nearly 6 percent after the company reported better than expected first-half profits and a pickup in market share. Meanwhile, Societe Generale shares rose 4 percent after France's second-largest bank reported a doubling in third quarter profit on strong earnings in investment banking. Adidas shares spiked 4 percent after it voiced cautious optimism for the coming year despite a 30 percent fall in third quarter profit.

Though the earnings helped provide some support in Europe's markets, investors are warning of volatile trading in the hours and days ahead amid a raft of economic news, particularly from the U.S.

"Market sentiment is still fragile after the past few weak sessions and given the amount of economic data out later on we could still see volatility in today's markets," said Arifa Sheikh-Usmani, an equity trader at Spreadex.

Wall Street was expected to open higher and recoup Tuesday's losses. Dow futures were up 63 points, or 0.7 percent, to 9,780 while the broader Standard & Poor's 500 futures rose 7 points, or 0.7 percent, to 1,048.70.

Investors will be watching the latest jobs survey from the ADP payrolls firm for clues to Friday's closely watched government nonfarm payrolls data for October, which often set the stock market tone for weeks. A monthly survey from the Institute for Supply Management will also be eyed for signs the services sector is growing strongly.

Later, the Fed takes center stage when it unveils its latest interest rate decision. Though no shift in interest rates is expected, investors will be on the lookout for any changes to the accompanying statement.

In particular, they will be looking to see if the Fed is more upbeat about the economic outlook and whether it provides pointers as to how it will withdraw the monetary stimulus in the future.

As well as slashing its benchmark interest rate to near zero percent, the Fed has pumped in trillions of dollars into the financial markets in an attempt to shore up confidence and get the world's largest economy moving forward again from the depths of recession.

Neil Mellor, an analyst at Bank of New York Mellon, doubts that there will be much change in the language of the statement, especially as Fed chairman Ben Bernanke has consistently voiced concerns about deflation.

"It must be presumed that Bernanke's strategy is one that favors taking risks with inflation rather than taking risks of falling into a trap (of deflation) that he has written a treatise on how to avoid," said Mellor, referring to Bernanke's past research as an academic. "As such, that should entail a glacial pace of policy change."

The European Central Bank and the Bank of England also announce interest rate decisions, on Thursday. Interest will focus on the Bank of England as most analysts reckon it will increase the amount of money it pumps into the economy.

Earlier, sentiment in Asia was helped by more optimism about China as the World Bank boosted its forecast for the world's third-largest economy this year from 7.2 percent to 8.4 percent, reflecting the country's enormous stimulus measures. The strength of China's rebound also led the Washington-based bank to increase its growth forecast for developing East Asia by 1.3 percentage points to 6.7 percent.

Japan's Nikkei 225 stock average added 41.36 points, or 0.4 percent, to 9,844.31 after the local financial markets were closed Tuesday for a national holiday. Hong Kong's Hang Seng climbed 374.71 points, or 1.8 percent, to 21,614.77, South Korea's Kospi added 1.9 percent to 1,579.93 and India's Sensex was higher by 2.1 percent at 15,735.14.

Oil prices pushed back above $80 a barrel alongside the stock market gains. Benchmark crude for December delivery was up 70 cents to $80.30 a barrel. The contract gained $1.47 overnight.

Gold, meanwhile, was mostly flat at $1,084 an ounce after hitting a new high of $1,087 an ounce overnight.

The dollar rose 0.7 percent to 90.95 yen while the euro was 0.3 percent higher at $1.4763.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.