* Trade-sensitive DAX gains as investors return from holiday
* Basic resources, auto stocks top gainers on STOXX
* Madrid's bank-heavy stock index the only laggard
(Updates to close)
By Sruthi Shankar
June 11 (Reuters) - European stocks finished higher for a
third day on Tuesday, as German shares caught up with a global
stock rally after a holiday on easing trade tensions, while
fresh stimulus for China's slowing economy boosted the basic
resources sector.
The pan-European STOXX 600 index .STOXX closed at its
highest level since May 17, with miners .SXPP , auto stocks
.SXAP and chemical companies .SX4P tacking on biggest gains
after reports that Beijing was opening the door to more spending
by local governments. Also buoying sentiment was U.S. President Donald Trump's
decision last week to hold off on imposing import tariffs on
Mexico which sparked a relief rally across markets on Monday.
Trading after Whit Monday holiday, Germany's trade-sensitive
DAX .GDAXI rose 0.9%, helped by gains in car makers BMW
BMWG.DE , Daimler DAIGn.DE and Volkswagen AS VOWG.DE .
Shares in industrial conglomerate ThyssenKrupp TKAG.DE ,
which generates about $1 billion euros in Mexico, jumped 4.8% to
the top of the DAX index.
"The Bank of China came out with some measures for stimulus
and therefore some of the more cyclical stocks are bouncing off
oversold levels," said Will James, senior investment director
for European equities at Aberdeen Standard Investments.
"All these stocks had a challenging May and one of the
reasons for the markets' delayed reaction is quite a lot of
markets in Europe were closed yesterday."
European stocks have climbed over 4% from their early June
lows on positive trade headlines and the prospect of interest
rate cuts by the U.S. Federal Reserve.
Worries about the impact of tensions between the United
States and China on the pace of growth in the world's major
economies sent European stocks down about 6% in May, their worst
month in more than two years.
Investors are now betting that the U.S. central bank will
ease monetary policy to counter any global slowdown from the
trade wars between the world's major economies.
Trump said on Monday he was ready to impose another round of
punitive tariffs on Chinese imports if he cannot make progress
in trade talks with Chinese President Xi Jinping at the G20
summit.
"The prospect of potential loosening of policy to avert a
further scaledown of the global economy, that's the reason why
there has been a bit of a sentiment shift in European markets,"
James added.
Madrid's bank-heavy IBEX .IBEX was a laggard, after Morgan
Stanley lowered its earnings estimates for Spanish banks for
2020 and 2021, factoring in a flatter yield curve as a result of
the European Central Bank's swing towards taking new steps to
reduce interest rates.
Helping Copenhagen-listed shares .OMXC20 up 2.5%, Novo
Nordisk NOVOb.CO rose 5.2% as data on cardiovascular outcomes
from competitor Eli Lilly's LLY.N diabetes drug was seen as
underwhelming.
Hugo Boss BOSSn.DE rose 4.3% after shares of the German
fashion house were upgraded to "equal-weight" from "underweight"
by Morgan Stanley for the luxury retailer's strategic plan to
reposition the brand under two labels. Limiting gains on London's FTSE midcap index .FTMC ,
fashion retailer Ted Baker TED.L tumbled 29% after it issued a
lower annual profit forecast, citing an "extremely difficult"
start to 2019.
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STOXX 600 performance since early June https://tmsnrt.rs/2R5mlfy
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