LONDON - European stock markets rose Wednesday after generally positive corporate earnings from leading industrial companies, though a sharp drop in Chinese stocks and an expected retreat at the open in the U.S. capped the gains.

The FTSE 100 of leading British shares was up 33.10 points, or 0.7 percent, at 4,561.94 while Germany's DAX rose 70.62 points, or 1.4 percent, to 5,245.36. The CAC-40 in France was 45.97 points, or 1.4 percent, higher at 3,376.94.

The early gains have more or less erased the losses posted Tuesday, when modest profit-taking drove trading after a two-week run that sent many of the world's major indexes to their highest levels this year.

Whether the losses posted in the previous session in the U.S. and Europe, and followed up in Asia early Wednesday, represented only natural pause for breath in a market rally will be closely monitored in the coming days.

"We are now in an important transition period for these markets and the next few days will be pivotal to see if we can continue the recent strength," said Jimmy Yates, head of equities at CMC Markets.

So far Wednesday, prospects don't look so bad, especially after a string of encouraging results in Europe and Asia.

In Asia, carmakers were in the spotlight. Nissan Motor Co. reported a smaller-than-expected loss for its fiscal first-quarter and unveiled plans to build more cars in China, one of the few auto markets where sales are still growing. Meanwhile, Honda Motor Co. bucked expectations and remained in profit.

In Europe, France's PSA Peugeot-Citroen reported a big loss for the first half of the year but generated strong cash flow from cost-cutting measures and an inventory drawdown. As a result, hopes that it won't have to tap shareholders for more cash helped the company's stock jump 7.8 percent to euro19.84 and to the top of the CAC-40 leaderboard. Rival Renault SA rallied in Peugeot's slipstream. It was up 5.5 percent to euro28.46.

Meanwhile in Germany, Bayer AG topped the DAX index despite sagging second-quarter sales and a 7 percent fall in net profit. The company's share price rose 4.2 percent to euro41.74 after the pharmaceutical and chemical company showed good growth at its health care unit, which makes Aspirin, Alka-Seltzer, Yasmin and the multiple sclerosis treatment Betaseron.

And Akzo Nobel NV, the world's largest maker of paint, saw its shares jump nearly 8 percent after it said margins had been preserved by cost-cutting and lower raw materials costs despite a 13 percent fall in second-quarter profit.