By Julien Ponthus
LONDON (Reuters) - European shares traded higher in the morning on Tuesday as a whiff of optimism over the Sino-U.S. trade dispute lifted sentiment after a burst of political risk and worries about global growth hit world markets in the previous session.
The Euro zone STOXXE (STOXXE) index was up 0.7 percent at 0920 GMT with Germany's DAX (GDAXI), the most sensitive to China due to its big exporters, up 0.9 percent.
Earlier, Asian shares got a bounce after reports that Chinese and U.S. trade officials spoke by phone, a sign that discussions between the world's top two economies continue even after the arrest of Huawei's CFO.
"Remember this isn't the first time these backroom negotiations have dangled a carrot in front of the markets," said Oanda trader Stephen Innes.
"And while I view this development as positively significant in the broader context, a trade war is far from over, and these are little more than a preliminary step in what should be a long and winding road fraught with peril," he added.
France's CAC 40 was up 0.8 percent after French president Emmanuel Macron pledged late on Monday to raise the minimum wage and cut taxes in a bid to prevent more violent protests that have rocked the euro zone's second largest economy.
Britain's FTSE 100 (FTSE) was up 0.4 percent with the pound stabilising after Monday's Brexit-related slide to 20-month lows and Prime Minister Theresa May's postponement of a key vote on how Britain will leave the European Union.
"The fact that markets are actually moving forward shows that investors are perhaps scouting around for bargains amid this year’s turmoil rather than sitting on their hands in fear", commented Russ Mould, investment director at AJ Bell.
Smaller companies in the UK-focused FTSE 250 (FTMC) were flat.
Among top performers was British advertising giant WPP (L:WPP), which rose 4.9 percent after announcing plans to spend 300 million pounds and cut 2,500 jobs - part of new boss Mark Read's plans to return the world's biggest advertising group to growth.
Shares in Ashtead (L:AHT) jumped 6.4 percent as the equipment rental firm said it expected full-year results ahead of expectations.
In Germany, Linde (DE:LING) rose 2.7 percent after news that shareholders would be offered an extra 1.22 euros to help complete a merger with U.S. rival Praxair (NYSE:PX).
France's Suez (PA:SEVI) fell 3.2 percent as a source said the board of French utility Engie (PA:ENGIE) decided to stick with its 32 percent stake in the utilities group.
In Italy, Banco BPM (MI:BAMI) was the best performer in Milan (FTMIB), up 3.1 percent after announcing it had agreed to sell up to 7.8 billion euros in bad loans along with a stake in its debt recovery business to Credito Fondiario and U.S. fund Elliott.