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Europe: Stocks driven higher by car-makers

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[BENGALURU] European shares rose on Tuesday to distance themselves further from a 3-1/2 month low hit during the previous session, aided by auto stocks which gained on broker recommendations.

The region's exchanges shook off early weakness from the technology sector, which trimmed losses to end 0.2 per cent lower. Sources said the United States is gearing up to investigate whether giants including Facebook Inc and Amazon misused their market power.

The Stoxx 600 rose 0.7 per cent, with Germany's DAX adding 1.5 per cent, while the FTSE 100 gained 0.4 per cent.

Stocks of auto-makers and their suppliers saw their best day in more than two months, rising 3.2 per cent, with brokerage RBC starting coverage on a slew of names in the sector.

Market voices on:

"The best performing stocks in Europe today have a short squeeze flavour, but equally a lean toward value-style bargain hunting ... auto parts (are) also rallying," said a trader, pointing to Hella and Continental AG, which surged 5.4 per cent and 3.2 per cent, respectively.

Daimler gained 4.1 per cent, supported by RBC starting coverage with an "outperform" rating.

Volkswagen, which RBC also rated "outperform", added 3.3 per cent. Sources told Reuters the firm is likely to launch the sale of transmissions maker Renk in the autumn, aiming to free up funds to invest more in electric vehicles.

Italy's FTSE MIB and the country's banks rose 1.8 per cent and 2.4 per cent, respectively. Yields on the sovereign's bonds fell as traders cited comments by Prime Minister Giuseppe Conte, who said the government had to abide by EU budget rules until such time as they could be changed.

Lenders in Italy have been under pressure over the last month, hurt by the country's differences with the European Union, a possible 3 billion euro (S$4.6 billion) fine and concerns about its debt burden.

Europe's banks rose 2.1 per cent. The sector's juicy 5.9 per cent dividend yield, as per Refinitiv Eikon data, makes it a far riskier holding compared to safe-haven German bonds, whose yields are negative up to at least the 10-year maturity.

There is growing speculation the European Central Bank could shift to a more dovish footing at next week's policy meeting, albeit leaving rates unchanged.

Food and beverage stocks fell 1 per cent, with losses led by Oslo-listed fish farmer SalMar ASA and seafood processor Mowi ASA dropping 5 per cent and 2.6 per cent, respectively.