Europe close: Stocks gain as trade tensions ebb a bit further

European stocks added to their recent gains as China confirmed tariff exemptions on some US goods and investors eyed Thursday's meeting of the European Central Bank where rate-setters were expected to unveil further stimulus measures.

By the close, the Stoxx 600 index had added 0.78% to 389.46 while Germany's Dax rose by 0.83% to 12,370.21 and France's CAC 40 increased 0.44% to 5,618.06. Meanwhile, London's FTSE 100 was 1.02% higher at 7,342.35.

Beijing confirmed it would suspend the 25.0% duty on imports of 16 US-made goods, including some medicines and insecticides, though tariffs would remain on more than 5,000 other goods.

Neil Wilson, market analyst at Markets.com, said: "At the very least it suggests a willingness to engage seriously in these talks. Nevertheless I think we remain a long way and even a presidential election away from a deal. The firing of US national security advisor John Bolton has also eased fears about an imminent escalation in tensions between the US and Iran."

The upcoming ECB meeting is likely to result in an interest rate cut, while five unnamed sources told Reuters a stimulus package was also set to include a pledge to keep rates low for longer and compensation for banks to counter the side-effects of negative rates.

David Madden, market analyst at CMC Markets, said: "The Fed already cut interest rates in June, and there is speculation about a further cut later this month, so the ECB might want to make the first move. Given that the base rate is 0%, and the deposit rate is -0.4%, the bank might not want to move just yet, as they might wish to hold fire in case things get a lot worse."

Among individual stocks, London-listed instrumentation company Spectris led the Stoxx 600 higher, while shares is London Stock Exchange Group jumped by almost 6% after a £30bn bid from Hong Kong Exchanges & Clearing.

Inditex, owner of fashion brands Zara and Massimo Dutti, saw its shares drop by 2.5% after profit margins fell short of analysts' expectations at the half-year stage, though sales increased by 7% to €12.8bn.

Shares in French handbag manufacturer Hermes were also weaker as it said the temporary closure of its stores in Hong Kong during recent protests dragged on sales, though the company still achieved interim revenue and net profit growth.

Meanwhile, defensive stocks such as French waste-disposal outfit Veolia Environnement, Italian gas distribution company Italgas and Spanish utility Iberdrola were broadly lower.