By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stock markets rose for a second straight day on Wednesday, fueled by better-than-expected German consumer-confidence data.

The Stoxx Europe 600 index rallied 1.4% to 283.51, building on a 1.5% gain from Tuesday.

Last week, the index dropped to the lowest level in 2013 on concerns the U.S. Federal Reserve will soon scale back its asset purchases. The benchmark is on track for a 5.8% monthly loss, which would mark the biggest one-month percentage decline since May 2012.

"From a technical perspective, given the large selling bias we have encountered over the last few sessions, with valuations remaining undemanding and U.S. data providing upside support, many fresh buyers have again entered into new longs," said Atif Latif, director of trading at Guardian Stockbrokers. He remains bullish on equities.

Among notable movers in the pan-European index, shares of Direct Line Insurance Group PLC climbed 4.3% after the U.K. firm announced plans to cut costs by 130 million pounds ($200 million) and cut about 2,000 jobs.

Spanish banks gained after Citigroup lifted the country's banking sector to neutral. Bankinter SA , which was upgraded to buy from sell, added 5.6%, and Banco Santander SA (SAN), which was lifted to neutral from sell, gained 3.7%. The IBEX 35 index jumped 2.4% to 7,788.30.

Investors took inspiration from the U.S., where indexes rallied Tuesday after data showed increases in durable-goods orders, new-home sales and consumer confidence. The gains came despite the looming prospect that the Federal Reserve may slow its bond purchases if the U.S. economy improves further. Also read: Bill Gross says Fed's tapering plan may be too hasty.

Data out on Wednesday, however, showed the U.S. economy in the first quarter expanded by 1.8% instead of 2.4% as previously estimated.

U.S. stock futures pointed to a higher open on Wall Street.

Most Asia markets also closed in positive territory. But China's Shanghai Composite dropped 0.4% as interbank money market rates remained unusually high, although down a bit from Tuesday.

German data improve

In Germany, the DAX 30 index climbed 1.5% to 7,926.60. Data showed German consumers are optimistic about the summer, with the GfK consumer-climate study forecasting a value of 6.8 points in July, up from 6.5 points in June.

The report comes after data out earlier this month pointed to an improvement in the euro-zone economy, with the manufacturing PMI climbing to a 16-month high and German business confidence rising for a second straight month. The brighter spots shouldn't, however, weaken the case for a further rate cut from the European Central Bank, when the bank meets next week, said Jack Kelly, investment director for global bonds, at Standard Life Investments.

"The economy is not strong enough although the core data has been resilient recently. The German Ifo was again a good number and we've seen improvement in PMIs across Europe, but bank lending and financial conditions, which are a lot of the things the ECB looks at, are still very weak in the periphery and more work needs to be done Europe. We haven't reached a turning point yet," he said.

"But I'm not banking on dramatic action [at the meeting next week]. I think they'll adopt a wait-and-see approach, partly because of the data and also because the choices are politically difficult," he added.

France's CAC 40 index gained 1.8% to 3,717.14.

Shares of Unibail-Rodamco SE added 2.4% after UBS lifted the property-investment firm to buy from neutral.

The U.K.'s FTSE 100 index rose 0.8% to 6,149.43.

Outside the major indexes, shares of Afren PLC jumped 7.3% and Lekoil Ltd. surged 11% after the two firms said their Ogo well offshore Nigeria discovered a significant light oil field.

Shares of Etablissementen Franz Colruyt NV jumped 7.5% in Brussels after the discount food retailer late Tuesday reported a 6.2% rise in full-year operating profit.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Afren (LSE:AFR)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Afren Charts.
Afren (LSE:AFR)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Afren Charts.