UPDATE 1-European shares rise as vaccine optimism outweighs new pandemic curbs

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(For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window)

* Tighter curbs imposed in London as cases surge

* Auto sectors lead gains as Volkswagen jumps 5%

* H&M drop after Q4 sale hit by pandemic

* JD sports gains after $325 mln Shoe Palace buy (Adds comment, updates prices)

By Susan Mathew and Amal S

Dec 15 (Reuters) – European shares rose on Tuesday, with optimism from vaccine roll-outs helping investors shake off nervous early trades as rising COVID-19 cases result in tighter curbs across the continent.

Vaccination drive in the United States, the latest Western country after the UK, boosted sentiment, lifting the pan-European STOXX 600 index up. 0.2%.

After an initial 0.5% slip, the London’s FTSE 100 gained 0.3%. .L

London moved into England’s highest tier of COVID-19 restrictions, with a new variant of the coronavirus likely causing increased infection rates. Italy was likely to go under partial lockdown from Dec. 24 to at least Jan. 2 and Germany was set for a new lockdown on Wednesday. with the European Union possibly approving a COVID-19 vaccine by January, investors are focusing on vaccine optimism, said David Madden, market analyst at CMC (NS:) Markets UK.

“Traders are looking beyond the impacts of immediate precautions of a stricter lockdown in the near-term.”

Among sectors, auto and parts makers led gains with Volkswagen rising 5% after its supervisory board said Chief Executive Herbert Diess had its full support as he leads a new team, averting a leadership crisis. rose as and iron ore prices were buoyed by upbeat factory output data from China. MET/l IRONORE/

Germany’s DAX and France’s CAC 40 , both with big auto and mining names, rose around 0.5%.

Analysts, however, warned of the impact of the new pandemic-led curbs. It could cost as much as 3.5 billion euros in lost value added for Germany, said Erik-Jan van Harn, a northern Europe economist at Rabobank, adding the second round of catch-up spending need not be as strong as the first.

Investors will also keep an eye on the outcome of the U.S. Federal Reserve’s two-day meeting set to begin on Tuesday as Washington struggles to pass a fiscal stimulus.

Europe’s retail sector lagged, pressured by a 2.7% drop in H&M after the world’s second-biggest fashion retailer, said that local-currency sales fell 10% in its fourth quarter, with a big slowdown in the final month due to the pandemic. losses in the sector were tempered by a 6.4% jump in JD Sports after the sportswear retailer said it bought U.S. retailer Shoe Palace for $325 million.

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