European stocks extend recovery as banking fears ebb

European stocks rose on Tuesday as investors grew hopeful that the banking crisis will be contained after a buyout deal for the failed Silicon Valley Bank.

The continent-wide STOXX 600 index (.STOXX) rose 0.7% by 0708 GMT, extending gains for a second session after last week's rout in banking shares caused by the collapse of Credit Suisse and two mid-sized U.S. lenders.

European banks (.SX7P) rose 1.6%, adding to Monday's 1.4% gain. Swiss bank UBS (UBSG.S) climbed 2.4% after CEO Ralph Hamers said the bank sees its government-orchestrated takeover of Credit Suisse (CSGN.S) as a growth opportunity, in an internal memo seen by Reuters. Credit Suisse shares rose 3.1%.

Oil & gas stocks (.SXEP), miners (.SXPP) and retailers (.SXRP) were among the other top sectorial gainers in Europe.

Telecom Italia (TLIT.MI) added 2.7% after Bloomberg News reported that Italy's state-backed lender is working on a higher bid for the company's landline network.

Zalando (ZALG.DE) climbed 2.7% after HSBC upgraded Europe's biggest online fashion retailer to "buy" from "hold".