Retail fuels Europe rally; DAX ends sharply up

European equities closed sharply higher on Tuesday, with a surge in retail stocks (STOXX:.SXRP) helping to boost investor sentiment. The pan-European FTSEurofirst 300 (FTSE International: .FTEU3) closed around 1.3 percent higher, with German stocks (^GDAXI) ending 1.6 percent up. The French CAC (Euronext Paris: .FCHI) closed 1.4 percent higher, while Italian and Portuguese stocks (Euronext Lisbon: .PSI20) both soared to end over 2 percent higher. Shares of U.K. retailer WM Morrison (London Stock Exchange: MRW-GB) surged 4 percent after an announcement that CEO Dalton Philips would leave the firm. London’s FTSE (FTSE International: .FTSE) ended 0.7 percent higher. Meanwhile, shares in rival retailer ASOS (London Stock Exchange: ASC-GB) rose as much as 9 percent after it posted a 15 percent rise in Christmas sales. However, Debenhams (London Stock Exchange: DEB-GB) was the major laggard for the sector, with shares falling as much as 8 percent after its trading update highlighted a slight dip in sales over the last 19 weeks. Read More Morrisons CEO to leave after Christmas sales fall Markets had opened in negative territory with investors continuing to fret about the falling price of oil. Heavily-weighted stocks like BP (London Stock Exchange: BP.-GB), Total (Euronext Paris: FP-FR) and Shell (London Stock Exchange: RDSA-GB) all fell in early deals but staged a turnaround in later in the day.

Oil prices slumped more than 5 percent overnight , extending the second-deepest rout on record, after Goldman Sachs slashed its short-term price forecasts and Gulf producers showed no sign of curbing output.

WTI crude for February delivery fell below $ 45 a barrel on Tuesday morning for the first time since April 2009 and was trading at $ 44.51 at 7.30 a.m. GMT. Brent crude futures were trading at $ 45.41 a barrel. Both have crash by around 60 percent since mid-June last year. The meltdown in oil prices has shaken global asset markets, but Stan Shamu, a market strategist at spreadbetter IG Markets, focused on the positives. “While the weaker oil prices continue to wreak havoc in the equities space, it’s important to take a step back and look at the available facts regarding lower prices,” he said in a morning note. “Last week’s FOMC (Federal Open market Committee) minutes showed the Fed saw price reductions as a net positive for GDP (gross domestic product) and employment growth, dismissing some of the concerns investors have.” U.S. stocks rallied on Tuesday, with equities bouncing back after a two-session drop, after aluminum-producer Alcoa kicked off the fourth-quarter earnings season by beating estimates. With the fourth-quarter earnings season started, investors are on the lookout for the the effect of crude’s decline on the S&P 500’s (^GSPC) collective bottom line. In other news, following the terrorist attack on its offices in Paris in which 12 people died, French satirical magazine Charlie Hebdo said that this week’s edition, due to be published Wednesday, will show a cartoon depicting the Prophet Muhammad holding a “Je suis Charlie” sign, according to various reports. Elsewhere, divers have retrieved the cockpit voice recorder from the wreck of an AirAsia passenger jet on Tuesday – a key piece of evidence for investigators to determine the cause of the crash that killed 162 people, Reuters reported. Meanwhile, the rate of inflation in the U.K.

fell to 0.5 percent in December year-on-year , according to new data on Tuesday morning. This was its lowest level in 14 years.

Asian shares were mixed on Tuesday , as traders weighed a better-than-expected trade report from the Chinese mainland and the continued fall in global oil markets. ]Follow us on Twitter: @CNBCWorld