UPDATE 2-German stocks outperform Europe as business morale rebounds

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* German business morale recovers in May - Ifo
* Lufthansa and German govt agree $9.8 bln rescue package
* Lagardere jumps as LVMH's Arnault to buy stake

(Updates to market close)
By Sruthi Shankar
May 25 (Reuters) - European shares rose in thin trade on
Monday as a closely watched indicator of German business
sentiment rebounded in May, with a slew of positive corporate
updates boosting sentiment.
Germany's DAX .GDAXI surged 2.9% to its highest level
since March 6, recovering nearly 38% from this year's low.
The euro zone stock index .STOXXE rose 2.1%, while the
pan-European STOXX 600 .STOXX gained 1.5%. Trading volumes
were lower across the board with the U.S., UK and some Asian
countries closed for holidays.
A survey by the Ifo Institute showed German business morale
rebounded in May after a dramatic fall the previous month, with
activity gradually returning to normal after weeks of
coronavirus-induced curbs. The Ifo business climate index rose to a
better-than-expected 79.5 from a downwardly revised 74.2 in
April.
"(The) rise...is certainly good news, as it suggests that
the downturn in sentiment came to a halt in May, and thus passed
its trough in April," wrote Thomas Strobel, an economist at
UniCredit.
"But the fact that the index did not show a stronger upward
development indicates that not all companies have experienced an
improvement in their economic situation yet."
Lufthansa LHAG.DE surged 7.5% after the German government
approved a 9 billion euro ($9.80 billion) package and a company
spokeswoman said it would resume flights to 20 destinations from
mid-June. Travel group TUI (LON:TUIT) AG TUIGn.DE jumped 15.3% on plans to
resume flights to main holiday destinations in Europe by the end
of next month. France's Airbus AIR.PA gained 8.5%, while the broader
travel & leisure index .SXTP was up 1.2%.
Despite growing U.S.-China tensions and worries of a
resurgence in COVID-19 cases stalling a recovery for equities in
recent weeks, investors focused on signs that many European
economies were coming back to life.
French authorities reported the smallest daily rise in new
coronavirus cases and deaths since before a lockdown began in
mid-March, while Spain is set to reopen to international
tourism from July, Prime Minister Pedro Sanchez said over the
weekend. All eyes will turn to the European Commission's recovery
plan on Wednesday after EU member states Austria, Sweden,
Denmark and the Netherlands stated their opposition to a
French-German plan for a 500-billion euros coronavirus recovery
fund. Boosting the STOXX 600, Germany's Bayer AG BAYGn.DE gained
7.8%, after saying it had made progress in seeking a settlement
over claims its Roundup weedkiller causes cancer. French multimedia conglomerate Lagardere SCA LAGA.PA
surged 16.2% after Bernard Arnault, the billionaire behind
luxury fashion group LVMH LVMH.PA , agreed to buy a stake in
the holding company of fellow billionaire Arnaud Lagardere.