By Tom Arnold
LONDON (Reuters) - Stock markets gained on Tuesday, with chipmakers and companies exposed to Asia among the best performers, after Washington temporarily eased trade restrictions imposed last week on China's Huawei.
In Europe, the broader Euro STOXX 600 climbed 0.6%, extending gains earlier in the trading session, with Germany's DAX rising 1.1%, while France's CAC 40 added 0.6%.
At the close, China's Shanghai Composite index was up 1.23%, while the blue-chip CSI300 index ended 1.35% higher.
U.S. President Donald Trump's government added Huawei to a trade blacklist last week, escalating trade tensions between the world's two biggest economies.
But Washington then allowed Huawei Technologies Co Ltd to purchase U.S.-made goods to maintain existing networks and provide software updates to existing Huawei handsets until Aug. 19.
"The Huawei extension is in some sense providing a relief rally as it eases the worst fears of market participants that we are drifting towards a fully fledged trade war," said Aberdeen Standard's head of global strategy, Andrew Milligan.
Chipmakers AMS, STMicroelectronics and Germany's Infineon added between 2% and 6%, while the tech sector rose 1.6% after losing almost 3% on Monday.
In London, heavyweights HSBC, Prudential (LON:PRU) and Standard Chartered (LON:STAN) boosted the blue-chip index as markets rose on hopes of an easing in the trade tensions.
In Asia, gains in heavyweight Samsung Electronics (KS:005930) helped South Korea's KOSPI stock index close up 0.3%.
The MSCI index of world shares, which tracks shares in 47 countries, was up 0.1% after losses in the two previous days.
"Equity markets remain hostage to developments in the ongoing U.S.-China trade battle," said Rupert Thompson, head of research at Kingswood.
"We still believe some kind of deal will eventually be reached - most likely at a Xi/Trump meeting at the G20 Summit in late June."
In Germany, Daimler gained 1.1%, getting an additional boost after German newspaper Handelsblatt reported the company was looking to cut administration costs by 20%. Daimler declined to comment.
Italy's biggest phone group Telecom Italia (MI:TLIT) led gainers on the STOXX 600, rising 1.9%, after posting first-quarter earnings in line with expectations and confirming its guidance for the next three years.
Markets now await Wednesday's release of minutes from the U.S. Federal Reserve's May 1 meeting, looking for signals on future interest rates after Chair Jerome Powell said on Monday that it was premature to ascertain the impact of trade and tariffs on the trajectory of monetary policy.
U.S. S&P 500 e-mini futures were up 0.6%.
POUND SLIPS
In currency markets, the British pound fell below $1.27 for the first time since mid-January, hit by dollar strength and expectations that Prime Minister Theresa May will fail to persuade cabinet colleagues to back an amended version of her Brexit withdrawal deal.
The pound slipped 0.2% to $1.2688 while against the euro it was down 0.14% to a new four-month low of 87.88 pence,.
The U.S. dollar rose to 2-1/2 week highs, supported by some safe haven inflows, while Australia's top policymaker Philip Lowe said on Tuesday the central bank would consider the case for lower interest rates at its June policy meeting, pushing the Aussie dollar lower by half a percent to $0.6873.
Government bond yields in much of the euro zone stabilized above recent multi-year lows as investors remained cautious about selling fixed income against a backdrop of trade tensions and economic growth concerns.
Oil prices edged higher on U.S.-Iran tensions and amid expectations that producer club OPEC will continue to withhold supply this year. [O/R]
Brent crude futures, the international benchmark for oil prices, were at $72.31 per barrel at 1030 GMT, up 34 cents, or 0.5%, from their last close.