European shares climb to three-week high on trade hopes

MILAN: European shares hit a three-week high on Tuesday in a broad-based rebound as hopes of a possible trade deal between China and the U.S. offset worries over global growth.

The pan-European STOXX 600 benchmark rose 0.8 percent by 0941 GMT while euro zone stocks and the UK's FTSE 100 both rose by 0.7 percent.

Germany's export-oriented DAX  index, which is particularly sensitive to trade issues, was up 0.6 percent, shrugging off earlier data showing that German industrial output fell unexpectedly in November for a third month running.

"The main driver of this optimism appears to be the ongoing trade talks between the U.S. and China in Beijing," said Spreadex analyst Connor Campbell.

"Not that there is anything too substantial to justify such positivity, but rather a lack of mood-dampening comments has green-lit an early European rebound."

Strength among retailers also propped up the market.

Their sectoral index rose 1.5 percent, with gains in France's Carrefour - up 1.2 percent after a U.S. bank upgraded its rating on the stock - more than offsetting a disappointing update from British supermarket chain Morrison .

Bank of America Merrill Lynch analysts upgraded Carrefour to a "buy", saying that 2019 could be a year of inflection for the company thanks to changes in French regulation and an improvement in the Brazilian economy. They said a sell-off in its shares because of protests in France was overdone.

Shares in Carrefour's domestic rival Casino also rose.

Morrison, meanwhile, fell 3.5 percent after it missed Christmas sales forecasts after weak consumer demand hit its retail and wholesale businesses.

Technology stocks also rebounded, with a fourth-quarter profit miss at Samsung failing to have much impact on a sector that heavily hit last week by Apple's first sales warning in nearly 12 years.

Shares in ASML firmed by 0.1 percent, though Liberum analysts said that the update from the world's biggest maker of smartphones and semiconductors provided a negative read-across for the Dutch company.

"Samsung is ASML's largest customer ... We therefore expect steady downward revisions to the revenue and earnings expectations of ASML and other equipment vendors through the course of this year," Liberum said.

Among other European tech stocks, chipmakers Infineon , Dialog and STMicro rose 0.7-0.8 percent. Europe's tech index is down more than 20 percent from its June 2018 peak.

Italian banks rose as much as 1.2 percent, also hitting a three-week high, on the Italian government's approval late on Monday of a decree aimed at shoring up troubled lender Carige.

Gains in the index fizzled out as shares in the country's top lenders Intesa Sanpaolo and UniCredit turned lower to trade down 0.6 and 1.1 percent respectively..

Shares in Carige were suspended last week by market regulator Consob.