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U.S.-China trade optimism boosts European stocks, DAX at month high

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Aug 25 (Reuters) - Renewed optimism over a U.S.-China trade deal and a smaller-than-expected decline in German economic output fuelled a rally in European stocks on Tuesday, with Frankfurt shares hitting a 1-month high.

The pan-European STOXX 600 index rose 0.8% by 0711 GMT, extending this week’s gains on the back of positive updates on COVID-19 treatment efforts.

Lifting sentiment, top U.S. and Chinese trade officials reaffirmed their commitment to the Phase 1 trade deal despite diplomatic rifts between the two countries.

The trade-sensitive German DAX rose 1%, helped by data showing Europe’s largest economy contracted by a record 9.7% in the second quarter, but marked a minor upward revision from an earlier estimate of -10.1%.

All eyes will be on the Ifo institute’s business climate index for August, due to be released at 0800 GMT.

Among individual stocks, technology company Aveva Group rose 3.2% after announcing a deal to buy OSIsoft, a privately held maker of industrial software, for an enterprise value of $5 billion.

LVMH gained 1.1% after a source told Reuters the French luxury goods giant and U.S. jewellery chain Tiffany will give themselves another three months to complete their $16.2 billion tie-up. (Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva)