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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 .STOXX 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 .GDAXI 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 AVV.L 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 LVMH.PA gained 1.1% after a source told Reuters the French luxury goods giant and U.S. jewellery chain Tiffany TIF.N 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)
((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2787;))
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