UPDATE 2-Chip rally helps European shares rise amid geopolitical tensions

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* Semiconductor stocks lift German, Italian indexes
* Automobile sector boosted by Rolls-Royce sales jump
* Spain gets coalition govt. after long political stalemate

(Updates to close)
By Medha Singh
Jan 7 (Reuters) - A rally in chip stocks helped German and
Italian shares strengthen on Tuesday while gains in other
European bourses were curbed by nervousness amid tension between
the United States and Iran.
Semiconductor stocks tracked their U.S. peers higher as
Microchip Technology MCHP.O raised its third-quarter sales
outlook. The technology index .SX8P rose 1.3%, the most among
European sub-sectors. .N
A more than 4% gain for Infineon Technologies IFXGn.DE
helped Germany's DAX .GDAXI rise 0.8% while
STMicroelectronics's STM.MI 2.5% gain lifted Italian .FTMIB
stocks by 0.6%.
The pan-regional STOXX 600 index .STOXX finished a
volatile session 0.2% higher after falling in the past two
sessions following the killing of a top Iranian commander in
Baghdad last week by the United States.
The benchmark index is 0.4% below its record high hit on
December 27.
"Relative to the potential political and humanitarian
consequences of an escalating conflict between Iran and a
U.S.-Saudi alliance, markets have reacted fairly calmly so far,"
wrote Berenberg economist Holger Schmieding in a note.
Oil prices surrendered some of their recent gains,
pressuring London's energy-heavy FTSE 100 .FTSE index.
Auto .SXAP stocks also shone after British carmaker
Rolls-Royce marked a 25% jump in 2019 sales, giving some comfort
to a sector that has been plagued by slowing global demand.
Shares of Rolls-Royce owner BMW BMWG.DE rose 1.6%.
On the other hand, luxury British carmaker Aston Martin
AML.L plunged about 16% after it warned its 2019 profits would
almost halve due to weak European markets. The stock was the biggest loser on the London's mid-cap
.FTMC index.
Spanish stocks .IBEX lagged as Socialist leader Pedro
Sanchez secured parliamentary backing by a tight margin to form
a coalition government, following two inconclusive national
elections last year. But without a solid majority in parliament, the coalition
may struggle to pass legislation and will need to negotiate with
other parties on a case by case basis.
"The Spanish economy could probably cope with a weak
left-left coalition that fails to get much done. Spain may
gradually cease to outperform the remainder of the Eurozone,"
Schmieding added.