LONDON: European shares rose on Tuesday as optimism over the China-U.S. trade dispute helped them recover from the two-year lows hit in the previous session on a burst of political risk and worries over slowing global growth.
The pan-European STOXX 600 benchmark index rose 1.5 percent, while euro zone stocks added 1.3 percent and Germany's DAX, the most sensitive to China due to its big exporters, rose 1.5 percent.
Sentiment was lifted by reports that Chinese and U.S. trade officials spoke by phone, a sign that discussions between the world's top two economies continued even after the arrest of a top executive at Chinese tech giant Huawei.
Further cementing expectations that trade talks had not been interrupted was a report that China was preparing to cut its tariffs on U.S. car imports.
"That would tick off one of Trump's post-G20 promises, while going someway to reassuring the markets that, despite the situation with Huawei's (CFO) Meng Wanzhou, the nations are willing to adhere to what was agreed in Argentina," said Connor Campbell, analyst at Spreadex.
China and the United States agreed this month to a ceasefire in their bitter trade war after high-stakes talks in Argentina between Presidents Donald Trump and Xi Jinping.
The export-oriented auto and tech sectors were among the biggest gainers, both up more than 2 percent, while materials stocks rose more than 3 percent as the trade hopes boosted metal prices.
France's CAC 40 was up 1.4 percent after French president Emmanuel Macron pledged late on Monday to raise the minimum wage and cut taxes in a bid to prevent more violent protests that have rocked the euro zone's number two economy.
France's Suez, however, fell 2.8 percent as a source said the board of French utility Engie decided to stick with its 32 percent stake in the utilities group.
In Italy, Banco BPM rose 2.5 percent after announcing it had agreed to sell up to 7.8 billion euros in bad loans along with a stake in its debt recovery business to Credito Fondiario and U.S. fund Elliott.
WPP rose 4.8 percent after the company said it would spend 300 million pounds and cut 2,500 jobs under a plan by new boss Mark Read to steer the world's biggest advertising group back to growth.
Shares in Ashtead jumped 3.6 percent as the equipment rental firm said it expected full-year results ahead of expectations.