European shares climb on trade relief, PMIs in focus

European shares inched higher on Tuesday on relief that the U.S.-China Phase One trade deal was "fully intact", while investors awaited the latest batch of business activity data to gauge the pace of recovery from the coronavirus crisis.

European shares inched higher on Tuesday on relief that the U.S.-China Phase One trade deal was "fully intact", while investors awaited the latest batch of business activity data to gauge the pace of recovery from the coronavirus crisis. The pan-European STOXX 600 index rose 1.1%, led higher by banks, automakers, and technology sectors.

Stoking volatile trading overnight, White House trade adviser Peter Navarro said the trade deal with China was "over", but later walked back those remarks, while U.S. President Donald Trump confirmed in a tweet the trade deal was fully intact. Markit's early readings of the eurozone Purchasing Managers' Index (PMI) for June, due at 0800 GMT, are likely to show business activity further improved from record low levels in April as many countries eased restrictions.

"Given the sharp growth contraction in the previous months, PMI readings of above 50 do not imply a return to pre-crisis levels," UniCredit analysts wrote in a note. "Current volatility in economic activity might mean that PMIs may not reflect the underlying trend in the economy and could remain in contractionary territory below 50."

After a more than 35% recovery from March lows, the STOXX 600 has traded sideways in recent weeks as investors remain cautious about the second wave of coronavirus infections that could stall an economic rebound even as central banks and governments inject cash into ailing economies. Bayer AG gained 2.0% after a U.S. federal appeals court blocked California from requiring the company to label its glyphosate-based weed killer, Roundup, with a cancer warning.

German metals trader Kloeckner & Co jumped 17.9% after it provided a positive earnings outlook for the second quarter.