Europe close: Stronger than expected PMI readings boost stocks

Better-than-expected readings on the euro area economy and reports of further government stimulus in the pipeline Stateside propelled shares higher on Tuesday.

That was despite a bout of volatility overnight after White House trade adviser, Peter Navarro, was quoted as saying the US-china trade deal was "over", only to quickly afterwards claim he had been "wildly misquoted", with Navarro explaining he was referring to Washington's trust in the Chinese government in the wake of the pandemic.

In any case, some traders were carefully watching frictions between Beijing and the US, European Union and India - not least on international trade - for any sign that some of the worst case scenarios might materialise.

For his part, US Treasury Secretary, Steven Mnuchin, said another round of government spending measures might be approved by July.

By the end of trading, the benchmark Stoxx 600 was up by 1.3% at 367.4, alongside a 2.13% advance for Germany's exporter-heavy Dax to 12,523.76 while the FTSE Mibtel added 1.86% to 19,841.58.

The best performing areas on the Stoxx 600 were Automobiles&Parts (3.01%) while lenders' shares climbing 2.63%.

Front month Brent crude oil futures relinquished early gains however, slipping 1.3% to $42.51 a barrel on ICE, while euro/dollar was up 0.43% to 1.1309.

In economic news, the key euro area manufacturing and services sector Purchasing Managers' Indices from IHS Markit both leapt past economists' forecasts.

The former rose from 30.5 for April to 47.3 in May (consensus: 40.5) and the latter from 31.9 to 48.2 (consensus: 41.0).

France's composite PMI, which aggregates results from both surveys fared best, leaping from 32.1 to 51.3 thanks to a rebound in manufacturing as the Covid-19 lockup in the country was eased.

IHS Markit conceded that the economic downturn would end heading into the summer, yet the "timing of a return to normal still something that can only be speculated upon."

"Virus-related restrictions likely to continue to hit many businesses for the rest of the year, we remain very cautious of the strength and sustainability of any economic rebound."

Meanwhile, the World Trade Organisation forecast that global trade might only shrink by 13% in 2020, versus an April projection for a drop of 13-32%, although that would still be a tad worse than the 12.5% crash seen during the 2008 financial crisis.