European shares bounce but trade jitters linger on

By Helen Reid and Julien Ponthus

LONDON (Reuters) - Better-than-expected euro zone economic data and energy stocks galvanized by an OPEC agreement on a modest increase in oil production helped drive a bounce in European shares at the end of a tumultuous week marred by trade war worries.

The pan-European STOXX 600 <.STOXX> ended the day up 1.1 percent but recorded a 1.1 percent fall on the week as fears of rising global protectionism sank in, particularly for the autos sector.

Shares in European carmakers and Germany's DAX <.GDAXI> briefly tanked in afternoon trading after President Donald Trump threatened a 20 percent tariff on car imports from the European Union.

German carmakers Daimler <DAIGn.DE>, Volkswagen <VOWG_p.DE> and BMW <BMWG.DE>, which are heavily reliant on U.S. car sales, ended the day down 0.3 percent, 1.1 percent and 0.2 percent respectively.

"Anything that comes on Twitter is just really noise, I don't think you can use that as an official medium to make global policies," said Alastair Sandler, an equity sales trader at Northern Trust Capital Markets.

"But certainly it's enough to spook the stocks into the weekend. It's a space people will be trying to avoid until the dust settles," he added.

Oil majors also gave a boost to the broader index on the back of an OPEC agreement on a modest increase in oil production.

France's Total <TOTF.PA> and Royal Dutch Shell <RDSa.AS> both added 3.3 percent.

Euro zone private business growth recovered in June and grew faster than expected, but manufacturing growth was the weakest in 18 months on trade worries, a PMI survey showed.

The better euro area data added to stronger figures from Germany and France to boost European benchmarks.

Banks drove the lion's share of gains after the 35 largest U.S. banks cleared the first stage of the Federal Reserve's annual stress test.

The European banks index <.SX7P> climbed 1.3 percent with Italian lenders leading the gainers.

BPER Banca <EMII.MI> jumped 4.7 percent after Unipol <UNPI.MI> raised its stake in the Italian regional lender.

"Within the context of high local political uncertainty which has weighed on government bonds and in turn on bank shares, this transaction could provide downside protection for BPER shares in the short term, notably as Unipol could still acquire another 5 percent of BPER," said GS analysts.

Overall, concern over a weaker economic picture and Italian politics has driven previously enthusiastic investors out of the European equity market, with tens of billions of outflows over the past three months.

"We are noticing revisions for earnings and GDP in Europe which are pretty negative, as opposed to the more positive revisions from the U.S., based on earnings growth but also clearly on tech stocks," said Eleanor Taylor Jolidon, co-head of global and Swiss equities at UBP in Geneva.

(Reporting by Helen Reid; Editing by Catherine Evans)