By Shreyashi Sanyal and Sruthi Shankar
(Reuters) - European shares moved higher on Thursday, with technology shares leading the charge after encouraging comments from China on trade with the United States soothed sentiment that was rattled by growth worries and political turmoil.
The Chinese commerce ministry said Beijing is in close communication with Washington and is preparing to make progress at trade talks in October.
Although investors are keeping a close watch and doubt a deal could be struck between the two sides in the near future, they are hopeful of any signs of progress in the negotiations.
"There will be a deal toward the second quarter of the upcoming year," said ING economist Timme Spakman, while adding that the U.S. needs to take a step back and give China some breathing space to make room for a deal.
Trade-sensitive tech stocks (SX8P) jumped 1.1%, helping the pan-European STOXX 600 index (STOXX) rise 0.5%.
Euro zone's blue-chip index (STOXX50E) climbed 0.5%, boosted by shares of semiconductor maker ASML Holdings (AS:ASML), while export-reliant Germany (GDAXI) gained 0.4%.
The comments on U.S.-China trade also helped spark a reversal in early losses after Bloomberg reported the World Trade Organization will authorize the U.S. to impose tariffs on nearly $8 billion of European goods due to illegal state aid provided to aircraft maker Airbus SE (PA:AIR).
European equity markets closed at two-week lows on Wednesday on fears about an impeachment inquiry into U.S. President Donald Trump and no clear view on progress in U.S.-China trade negotiations.
Investor confidence has also been shaken by weak readings on economic data and recent profit warnings from big European companies, which have fueled renewed fears of a corporate blood bath for the upcoming earnings season.
The latest warning came from Imperial Brands Plc (L:IMB), which tumbled 10.2%, after it said its expects full-year profit to be flat compared to last year in the face of a regulatory backlash against vaping in the United States.
Shares of peer British American Tobacco Plc (L:BATS) also fell 2.2%.
The personal & household goods index (SXQP) rose 0.1%, logging the smallest gain among major European sub-sectors.
Pearson (L:PSON) slid 16.7%, to the bottom of the STOXX 600, after the British education company warned its full-year profit would come in at the bottom of its forecast range.
However, Belgian supermarket chain Colruyt (BR:COLR) jumped 5.2% after the company said it expected full-year net income to rise slightly.
(The story is refiled to add dropped letter in headline)