UPDATE 1-Poor PMI data turns European shares lower

European shares dipped on Tuesday as weak factory activity data from across the eurozone spurred fears of an economic slowdown, overturning early gains due to signs the United States was not seeking another radical escalation of its trade war with China.

The pan-European STOXX 600 index had touched a two-month high after opening, tracking gains in Asia and on Wall Street after trade adviser Peter Navarro dismissed reports the White House could seek to force Chinese companies to delist from U.S. exchanges. The release of IHS Markit's surveys of manufacturing sector purchasing managers (PMI) for September soured the mood and pushed the main index 0.1% into the red.

"The latest surveys from Spain, Italy, France, and Germany have served to reinforce the fragility of the manufacturing sector in Europe," said Michael Hewson, chief market analyst at CMC Markets. Countering those losses was a 0.7% jump in the automobiles & parts sector after French car manufacturers' body CCFA said the decline in its domestic market should slow down this year and end 2019 at stable levels.

Renault and car parts maker Faurecia led gains in the sector, each rising 2%, while German auto parts maker Hella gained 1.1%. Gains in AMS, Dialog, and STMicro, pushed the technology sector 0.6% higher after Apple Inc's Chief Executive Officer Tim Cook was quoted as saying that sales of new range iPhones had started strongly.

The STOXX 600 gained around 2% in the third quarter compared to 12% in the first three months of this year, as the U.S.-China trade war worsened economic prospects and slowed a global stocks rally that dates back almost a decade. "The outlook for the next quarter depends on the trade war and I would say is broadly positive," said Rachel Winter, investment director at asset manager Killik & Co.

"We'll certainly have some progress, perhaps a partial resolution will happen. But I will be very surprised to see a complete resolution within the short term." Among other stocks, Air France-KLM jumped 1.4%, after BofA Merrill Lynch reinstated coverage on the French carrier with a "buy". The brokerage also set "buy" recommendations for British Airways owner IAG and Wizz Air.

Danish facility services provider ISS fell 1.6% after Jefferies downgraded the stock to "hold".

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