UPDATE 2-Defensive stocks help Europe close higher as focus turns to U.S. stimulus

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* LVMH falls as Q2 results underwhelm, hits other luxury
stocks
* All eyes on talks over U.S. stimulus, Fed meeting
* Carmaker Peugeot gains after sticking to margin target

(Updates to market close)
By Sruthi Shankar
July 28 (Reuters) - European shares closed modestly higher
on Tuesday, as investors assessed a batch of mixed earnings
reports while holding out for more U.S. stimulus to limit the
economic damage of COVID-19.
The pan-European STOXX 600 .STOXX rose 0.4%, with
defensive sectors such as healthcare .SXDP , food & beverage
.SX3P and utilities .SX6P boosting the main index. Travel
stocks .SXTP rebounded from losses on Monday when worries of a
resurgence in coronavirus cases in Europe hit risk sentiment.
Investors awaited the conclusion of a U.S. Federal Reserve
meeting on Wednesday, when policymakers are expected to
reiterate their supportive stance as talks loom over another
round of fiscal stimulus for the U.S.
economy. "Even if tomorrow is unlikely to be the right moment for a
more expansionary monetary policy approach, the Fed will no
doubt sound prepared for further easing," Commerzbank analysts
told clients in a note.
Earnings season also kicked into high gear in Europe, with
luxury giant LVMH LVMH.PA sliding 4.1% as store closures
sparked by the pandemic tore a hole into the Louis Vuitton
owner's second-quarter sales. Gucci owner Kering PRTP.PA and France's Hermes HRMS.PA
slipped over 2%, while Moncler MONC.MI , which makes luxury
puffer jackets, shed 4.4% after reporting a first-half operating
loss for the first time in its history. Profits for companies listed on the STOXX 600 are expected
to drop by a record 59% in the second quarter, according to
Refinitiv data.
But with much of the decline priced in, European stocks are
on course to end July with gains, supported by a European Union
deal to jointly issue bonds to combat the economic fallout of
the pandemic and hopes of a COVID-19 vaccine.
"Q2 will be the bottom of the earnings cycle most probably,
and the expectations were quite gloomy and that's why we are
having some nice surprises on results," said Michele Morganti,
senior equity strategist at Generali Insurance Asset Management.
"The confidence in European assets can be sustained by the
approval of the recovery fund."
Peugeot maker PSA Group PEUP.PA rose 2.4% as it held on to
its margin target despite a fall in profitability in the first
half of 2020. Online takeaway food company Delivery Hero SE DHER.DE
jumped 2.4% after it raised its forecast for 2020 sales after
nearly doubling quarterly revenues. British housebuilders .FTNMX3720 jumped 2% after a report
that the UK government is drawing up extension to its Help to
Buy scheme, which makes it easier for first-time buyers to
afford a home.