European shares close higher as US-China tariff truce, US data buoy sentiment

By Twesha Dikshit, Purvi Agarwal and Sukriti Gupta

Aug 12 (Reuters) - European shares closed higher on Tuesday on optimism about the U.S.-China tariff truce and interest rate cuts by the U.S. Federal Reserve, while declines in heavyweight technology stocks limited gains.

The pan-European STOXX 600 index .STOXX closed 0.2% higher a day after starting the week lower.

Investors were relieved after Washington and Beijing extended a tariff truce by 90 days, staving off triple-digit duties on each other's goods until November 10.

"Equity markets have been pretty relaxed about all the trade news. The assumption seems to be that (U.S. President Donald) Trump will relent on everything and that it will all be OK," said Rob Perrone, investment specialist for Orbis Investments. "If the news is better than yesterday's, then stocks go up."

Most sectors on the benchmark STOXX 600 .STOXX rose, led by energy .SXEP with a 1.5% advance. Vestas Wind Systems VWS.CO outperformed peers with a 4.7% gain, after receiving U.S. orders for undisclosed projects.

Heavyweight tech shares .SX8P fell 2.1% to their lowest levels since early May. Software stocks in particular fell sharply on concerns that artificial intelligence could weaken this technology segment.

SAP SAPG.DE slid 7%, while Nemetschek SE NEKG.DE was down 11%, the biggest decliners on the index. The stocks logged their steepest one-day declines since 2020.

Most regional indexes were higher, but Germany's DAX .GDAXI, dipped 0.2%. German investor morale fell more than expected in August, an index showed.

Latest earnings forecasts showed companies are expected to report 4.8% growth in second-quarter earnings, on average, above the previously expected 3.1%, according to LSEG I/B/E/S data.

Earnings in Europe have been resilient so far, partly because the recent EU-US tariff deal has eased concerns over how Trump's levies might affect corporate performance.

Moreover, data showed U.S. inflation rose broadly in line with expectations in July, putting the Fed on track to lower interest rates next month.

Markets also eyed a Friday meeting between Trump and Russian President Vladimir Putin on Russia's war in Ukraine. Trump said on Monday that both Kyiv and Moscow will have to cede land to end the war.

European leaders and Ukrainian President Volodymyr Zelenskiy plan to speak with Trump on Wednesday amid fears that Washington might dictate unfavourable peace terms to Kyiv.

Among other stocks, Spirax Group SPX.L surged 13% to record its best day since March 1983, after the British manufacturing group's first-half results beat expectations.

Sartorius SATG.DE rose 7.4% after Jefferies upgraded the pharmaceutical equipment supplier's stock rating to "buy" from "hold".

Conversely, Derwent London <DLN.L> shares dropped 6% after reporting lower first-half earnings.