European stocks closed higher for a second consecutive day on Tuesday after Russian President Vladimir Putin calmed markets by saying there was no need to divide Ukraine further.
Putin speech watched
The pan-European provisionally closed higher by 0.7 percent at 1,306.09 points, having received a midday bounce after trading lower for much of the morning. Putin said he did not want another Ukraine split, suggesting he was not considering military action to seize more of the country after approving plans to make Crimea part of Russia.
The news sent U.S. stocks higher, with shares across the Atlantic also responding the Commerce Department's report that housing starts were little changed last month, illustrating that the industry is stabilizing after harsh weather dented home building.
The Federal Reserve on Tuesday began a two-day policy-setting session, with the central bank expected to announce that it would continue tapering asset purchases on Wednesday.
(Read more: Yellen's mediadebut: Plenty at stake politically)
European stocks started the day lower ahead of Putin's speech. However, the week so far has seen investors respond positively to the non-violent aftermath of the referendum in Crimea at the weekend. The FTSEurofirst is, however, down about 1 percent so far in 2014, having risen by 16 percent last year.
On Monday, U.S. and EU slapped 11 sanctions on Russian and Ukrainian officials and on Tuesday, Putin addressed Russia's parliament, showing his intent on making Crimea part of the Russian Federation. This came a day after signing a decree recognizing the region as a sovereign state.
(Read our live blog: Putin: Crimea as part of Ukraine a 'shocking injustice' )
However, despite Tuesday's gains, there were still concern over future developments in Crimea. A Ukrainian officer was wounded in a shooting on the outskirts of Simferopol, Crimea on Tuesday, although it was unclear who was behind the incident.
Furthermore, Ukraine's prime minister Arseniy Yatsenyuk said that the conflict between Russia and Ukraine over Crimea was now entering a "military stage," according to the Interfax news agency.
German court rules on ESM
In Germany, the constitutional court ruled that the European bailout fund, the European Stability Mechanism, was in line with the country's constitution. The ruling removes uncertainty surrounding the new defense mechanism for the euro zone.
(Read more: German court says euro zone's crisis fund is legal)
In Asia equity markets rose on Tuesday, stabilizing after recent volatility. On Wall Street, the snapped a five-session losing streak, posting its best one-day gain in two weeks, and focus now turns to the Fed's monetary policy meeting.