China recovery hopes, upbeat data lift European shares; HSBC leads

By Sruthi Shankar and Susan Mathew

(Reuters) - European shares closed at their highest in nearly a month on Monday, as upbeat economic data tied in with a rally in China's markets on hopes of recovery from a coronavirus-induced slump.

The pan-European STOXX 600 <.STOXX> climbed 1.6% on broad-based gains, with Asia-focused lender HSBC jumping 6.6% to lead Europe's battered banks index <.SX7P> almost 4% higher.

Other stocks exposed to China, including carmakers <.SXAP>, industrials <.SXNP>, energy firms <.SXEP> and luxury goods makers, gained strongly.

London's FTSE 100 <.FTSE> and Spain's IBEX <.IBEX> ended 2% higher, while Germany's DAX <.GDAXI> rose 1.6%.

Data showing a record rebound in euro zone retail sales in May following a pandemic-driven historic slump in the previous two months, and an unexpected growth in the U.S. services sector last month further bolstered sentiment.

Globally, the appetite for risk rose after mainland China stocks <.SSEC> <.CSI300> jumped more than 5%, as investors stocked up on cheap funding to invest in an economy that analysts predict will recover faster and better than other major countries battling new waves of infections. [.SS]

"Trading exuberance in China, improving economic data, and hopes for renewed stimulus efforts," support the day's rally, said Edward Moya, senior market analyst at OANDA, New York. He added that markets will continue to overlook increases in U.S. COVID-19 cases until fatality numbers surge.

But industrial orders data suggesting Germany's recovery from the pandemic will be slow and painful gave some a pause for thought.

"Investor sentiment is still not euphoric, most brokers are cautious in the short term and investor positioning remains muted," said Berenberg strategists in a note.

Europe's STOXX 600 has recovered about 37% since March lows driven in part by large stimulus measures and vaccine hopes, but its still remains about 10% lower for the year.

Among individual stocks, sensor maker AMS climbed 4% on getting EU antitrust clearance for its 4.6-billion-euro ($5.20-billion) acquisition of German lighting group Osram .

Swiss speciality chemicals group Clariant slumped 12.6% to the bottom of STOXX 600 on trading ex-dividend.

UK homebuilders Persimmon , Taylor Wimpey and Barratt Developments rallied on reports that British Finance Minister Rishi Sunak planned to raise a property tax threshold, among other steps to reduce the economic toll of the health crisis. [.L]

Barratt said it was starting the new financial year with "cautious optimism" as its forward order book improved.

(Reporting by Sruthi Shankar in Bengaluru; editing by Patrick Graham, Sriraj Kalluvila and Andrew Heavens)