UPDATE 2-China data, trade hopes boost European shares

European shares started the second quarter strongly on Monday, posting their biggest daily gain in a month and a half, as unexpectedly strong factory data from China and signs of progress in its trade talks with Washington boosted risk appetite. China's manufacturing sector surprisingly returned to growth for the first time in four months. The country's State Council on Sunday said additional tariffs on imports of U.S. vehicles and auto parts would continue to be suspended after April 1 in a goodwill gesture.

The pan-European share index closed up 1.2 percent, as stocks of automakers and their suppliers jumped 3.3 percent in their best daily showing since early 2019. Advances in all but two sectors helped the benchmark build on its best quarterly performance in four years. "It's the optimism coming out of China," said Naeem Aslam, chief market analyst at TF Global Markets (UK) Ltd in London.

"A (manufacturing) reading above 50 was a very important number for investors to see and that has also strengthened the argument that trade war pessimism has started to fade away." The data helped offset the impact of parallel surveys showing Germany's manufacturing index sliding to an 80-month low and euro zone's factories registering their worst month for almost six years.

Germany's DAX - a bellwether for trade sentiment - added 1.35 percent. Bourses elsewhere in Europe also rose. Among autos, Continental AG gained 5.2 percent, while Daimler AG rose 4.1 percent.

The sector was also boosted by a Bloomberg report saying France's Peugeot SA and Italy's Fiat Chrysler Automobiles were exploring a European partnership, sending their stocks up 4.2 percent and 2.4 percent, respectively. Banking stocks rose 2.7 percent, with Italian lender Unicredit among the strongest performers with a 4.3 percent jump after Goldman Sachs added the bank to its conviction list.

The basic resources index recorded its best day since January, notching its highest level since June as commodity prices firmed after the Chinese data. Swiss logistics group Panalpina soared 15 percent after accepting an increased bid of 4.6 billion Swiss francs ($4.6 billion) from Danish rival DSV, ending a more than two-month takeover battle.

London-traded equities gained on advances by miners and banks. Britain's EasyJet tumbled 9.7 percent after warning that Brexit jitters and a weaker economic outlook were taking their toll on demand and pricing.

Rival low-cost airline Ryanair Holdings declined 2.6 percent. (Reporting by Aaron Saldanha, Additional reporting by Medha Singh and Agamoni Ghosh in Bengaluru Editing by Jon Boyle and John Stonestreet)