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* Germany leads rally as automakers climb
* STOXX 600 in positive territory for May
* Renault gains on French government aid plan
* ThyssenKrupp up on talks over steel business consolidation
(Updates to market close)
By Sruthi Shankar
May 18 (Reuters) - European shares enjoyed their best day in
nearly eight weeks on Monday, with cyclical sectors soaring as
an easing of lockdowns and an encouraging report on a potential
COVID-19 vaccine boosted hopes of a swifter economic recovery.
Miners leapt 8%, leading Europe's sectoral gains,
while automakers, oil and gas and travel and
leisure indexes - typically reliant on the health of a
global economy that has taken a battering due to the coronavirus
crisis - gained between 6.5% and 7.9%.
Germany's auto-heavy DAX surged 5.7% to its highest
level in over two weeks, while France's main index rose
5.2%.
The two countries called for the creation of a European
Recovery Fund worth 500 billion euros ($544 billion) to help the
region quickly exit the crisis.
The single biggest boost to the STOXX 600 was France's Total
, which surged 7.4% after it agreed to buy assets from
EnergÃas de Portugal.
Other oil majors BP Plc and Royal Dutch Shell Plc
rose nearly 8%, as optimism over output cuts and signs
of demand recovery lifted Brent crude to a one-month
high.
Giving additional impetus to the rally, U.S. drugmaker
Moderna said its experimental COVID-19 vaccine showed
promising results in a small early-stage trial.
The pan-European STOXX 600 rose 4.1%, in its
biggest one-day percentage gain since March 24.
"Everything seemed to go right for risk appetite today and
that will not likely be story going forward," said Oanda's
senior market analyst Edward Moya.
"A vaccine is a gamechanger for the prospects of economic
activity to return to pre-virus levels, but that is still months
away from being finalized."
Governments and central banks globally have unleashed
unprecedented stimulus to prop up the economy, helping the STOXX
600 recover 27% from its March lows as investors also hope for a
gradual return to normal.
Shops, restaurants and hair salons prepared to reopen in
Italy on Monday, while other centres of the outbreak such as New
York and Spain gradually lifted restrictions.
"Post the strong rally in equity markets from the lows, we
believe this economic upturn is already largely priced in,"
Morgan Stanley's European equity strategist Graham Secker said
in a client note.
"We think valuations look full as we see further earnings
downgrades as necessary for 2H20 and into 2021."
French automakers Renault SA and Peugeot SA
gained 8.7% each after finance minister Bruno Le Maire
told a local radio channel the government was hoping to announce
a plan within 15 days to help the country's automobile sector.
German conglomerate Thyssenkrupp AG jumped 12.5%
after a source told Reuters it was in talks with international
peers about consolidating its loss-making steel business.
Ryanair shares surged 15.8% after Europe's largest
low-cost carrier announced details of sharp cost cuts and
promised a swift return to full capacity and expansion in the
aftermath of the COVID-19 crisis.
Among decliners, Norwegian Air Shuttle ASA's shares
tumbled 22.3% as the company said its issue of new equity was
completed.
(Reporting by Sruthi Shankar in Bengaluru; graphics by
Thyagaraju Adinarayan in London; editing by Shounak Dasgupta and
Mark Potter)
