Upbeat earnings push European stocks close to record highs

European stocks hit a more-than two-month high on Tuesday, ending just below record levels as strong results from UBS, Reckitt Benckiser and others added to overall optimism about the third-quarter earnings season.

The pan-European STOXX 600 rose 0.8% to 475.74 points, its highest closing level since a record-high finish of 475.83 in August.

The financial services sector rose 0.9% as the world's largest wealth manager, UBS, posted its best quarterly profit since 2015, helped by robust trading activity.

Lysol cleaning products maker Reckitt Benckiser Group jumped 5.8% and was among the top gainers on Britain's FTSE 100 after it raised its full-year forecast and beat estimates for third-quarter sales.

Germany's DAX and France's CAC 40 gained 1.0% and 0.8%, respectively.

European travel and leisure stocks were the best performers for the day, adding 1.9% on gains in hotel operator Whitbread.

European stocks mark best week in seven months

The stock surged 4.4% after it reported a smaller half-year loss and predicted a full recovery at its UK hotels in 2022.

"A lot of the companies have been benefiting from the high prices they've been charging," said Equiti Capital macro economist Stuart Cole, who expects a positive earnings season for European companies.

"Equity markets are doing really well despite soaring energy prices, the threat of higher interest rates and yields generally rising...all points to markets getting more comfortable with where things are."

Despite concerns about soaring commodity prices and supply-chain bottlenecks driving higher inflation, a series of strong earnings reports put the STOXX 600 on course to end October with gains while erasing all of September's losses.

Focus will also be on the European Central Bank meeting on Thursday, where policymakers are set to meet amid soaring inflation expectations in the euro zone. The ECB has said the recent inflation surge will be transitory and has clearly indicated no policy tightening until it averages around its 2% target.

Rising inflation expectations kept bond yields elevated, helping the European banks sector add 0.4%.

Swiss drugmaker Novartis rose 1.1% after reporting a rise in adjusted operating profit and forecasting higher peak sales for its two best-selling pharmaceuticals.

Among decliners, computer peripherals maker Logitech International slumped 4.3% after it confirmed full-year earnings outlook and warned of supply chain disruptions.

French telecoms operator Orange fell 1.7% after saying its third-quarter profit was hit by a drop in co-financing returns.