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MarketPulse Europe: Stoxx Hits 2-Month High as PMIs Rebound -- European stocks hit a two-month high Tuesday on hopes that the euro area economy may be bottoming out after a sharp slowdown at the end of last year.

IHS Markit’s composite purchasing managers’ index for the euro zone rose for the first time in four months in January, with an index reading of 51 that indicates the economy was still in expansion mode at the start of the year.

At 05:00 AM ET (10.00 GMT), the Euro Stoxx 50 was up 0.8% at 3,189.35, while the U.K. FTSE 100 was up 1.1% and the German Dax 30 up 0.9%

Leading the charge are Italy’s bombed-out banks, which have been under pressure for months as the country slid back into recession, threatening to add to their mountain of bad debts. While there is no clear trigger in today’s news, there has been speculation that the recent collapse of small regional lender Carige could speed up consolidation in the sector.

Later today, Intesa SanPaolo, the country’s largest bank, will report earnings for the fourth quarter that should include solid gains on its bond portfolio. Italian bonds rallied sharply in December, unnoticed by equity markets that were preoccupied with the China-U.S. trade war. Unicredit (MI:CRDI), Banco Bpm SpA (MI:BAMI) and UBI Banca (MI:UBI) have all followed Intesa higher this morning.

Elsewhere, BP (LON:BP) led the U.K. FTSE 100 higher with a surge in profits and revenue – including a big contribution from Russian oil giant Rosneft (LON:ROSNq), in which it holds an 18% stake.

Lagging the field are chipmakers, after a disappointing update from Germany’s Infineon (DE:IFXGn) that also weighed on its rival STMicroelectronics (PA:STM).

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