UPDATE 2-European shares drop from record high on threat of U.S. auto tariffs

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(Reuters) – European shares rose on Wednesday, boosted by a clutch of positive earnings updates and China’s effort to contain a virus outbreak, with trade-sensitive German shares hitting record levels for the first time in two years.

Frankfurt’s DAX .GDAXI outperformed regional peers, following a survey on Tuesday that showed a U.S.-China trade truce had lifted German investor morale to its highest since 2015.

“The DAX is breaking out to new highs with rising evidence that an industrial rebound is just around the corner,” said Jasper Lawler, head of research at London Capital Group.

Gains in SAP (SAPG.DE) shares provided the biggest boost to DAX, after IBM Corp (IBM.N) forecast full-year profit above market expectations.

Global stocks rose after swift actions by Chinese authorities to tighten containment eased fears of a global pandemic, helping the pan-European STOXX 600 rise 0.1% to within spitting distance of its all-time high hit last week.

“While the virus appears contained, investors still appear to be in ‘buy the dip’ mode,” said Michael Hewson, chief market analyst at CMC Markets UK.

Hopes that cooling trade tensions between the United States and China would revive global growth have lifted the benchmark index to its record high. The focus now turns to the fourth-quarter earnings season in Europe.

Shares of Norway’s Gjensidige (GJFS.OL) were on track for their best day in more than four years after the insurer posted better-than-expected fourth-quarter earnings and set an extra dividend on top of its normal payout to shareholders.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 21, 2020. REUTERS/Staff

Britain’s Berkeley Group Plc (BKGH.L) jumped 5% as the housebuilder said it would boost shareholder return by about 455 million pounds ($594.00 million) over the next two years.

British luxury label Burberry (BRBY.L) raised its full-year sales forecast but analysts said the upgrade was already priced in. Its shares reversed early gains to trade down 3.9%.

Italy’s FTMIB .FTMIB lagged after reports that Luigi di Maio would step down as the leader of the co-ruling 5-Star Movement, triggering fresh election uncertainty.

Reporting by Medha Singh in Bengaluru; Editing by Anil D’Silva

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