Europe looks poised to exit its recession, making its stocks more attractive to investors.

The eurozone Purchasing Managers' Index rose to 50.5 in July from 48.7 in June, the first time it has topped 50 in 18 months. A reading above that level signals expanding business activity in the region. Meanwhile, eurozone retail sales increased 1 percent in May from April.

"Growth in the eurozone is still hovering around zero, but it has been getting better, and the market is responding to that," Rory McPherson of Russell Investments' multi-asset group in London, told The Wall Street Journal.

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With European stock prices still cheap as compared with U.S. stocks, "there's a lot of potential," he said.

While European stocks have risen over the past year, the Stoxx Europe 600 index's 14.5 percent gain trails the Standard & Poor's 500 Index's 23 percent jump.

Many major European companies have solid balance sheets, pay healthy dividends and generate more of their sales overseas than many of their U.S. counterparts do, The Journal noted.

Late last month, Goldman Sachs strategists increased their 12-month forecast for the Stoxx Europe 600 to a gain of 13 percent, compared with their forecast of an 8 percent ascent for the S&P 500, the paper reports.

"Corporate Europe is very different to sovereign Europe or consumer Europe or financial Europe," said Michael Barakos, chief investment officer for European equities at J.P. Morgan Asset Management in London.

Kevin Gardiner, chief investment officer for Europe at Barclays's wealth- and investment-management business, told The Journal, "European equities can do better than their local economies would suggest."

European stocks rose Tuesday for the seventh day in a row, their longest winning streak of the year.

"We're finally seeing economic data picking up," Andrea Williams, head of European equities at Royal London Asset Management, told Bloomberg. "The U.S. is still delivering strong data, and core Europe is OK. The valuation of the market is still supportive."

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