UPDATE 2-German stocks outpace rest of Europe as cyclicals jump

(For a live blog on European stocks, type LIVE/ in an Eikon
news window)
* German carmakers jump on report of buyer bonus scheme
* Worries over U.S.-China tension, U.S. protests persist
* Norway's Seadrill slides on $1.2 billion asset writedown

(Updates to market close)
By Sruthi Shankar
June 2 (Reuters) - European stocks hit their highest level
since early March on Tuesday, cementing a rotation into cyclical
sectors that helped German shares outperform.
The pan-European STOXX 600 .STOXX rose 1.6% to notch its
strongest close since March 6, while a post-holiday catch up saw
Germany's main share index .GDAXI jump 3.8% to its highest in
nearly three months.
Volkswagen VOWG_p.DE , Daimler DAIGn.DE and BMW BMWG.DE
gained between 5.2% and 7.7% on hopes the German government's
proposed 5-billion-euro ($5.6 billion) stimulus package will
boost car sales. Parties in Chancellor Angela Merkel's coalition wrestled on
Tuesday over final details of a broader stimulus package to aid
the economic recovery from the COVID-19 pandemic. Europe's automobiles & parts index .SXAP jumped 3.8%,
while insurers .SXIP , real estate .SX86P , oil & gas .SXEP
and banking .SX7P sectors rose between 2.9% and 3.9%.
The growth-sensitive sectors have recovered since mid-May on
the back of improving economic data as lockdown restrictions
across the world ease, helping the STOXX 600 index climb nearly
34% from a March trough.
The European Central Bank is also set to meet on Thursday,
with policymakers expected to ramp up bond purchases.
The broad optimism helped investors look past rising
U.S.-China trade tensions and the worst civil unrest in the
United States in decades. "There continues to be a push and pull battle raging in
stock markets with the technical position winning again in May,"
wrote Roger Jones, head of equities at London & Capital.
"This created positive returns but the fundamental outlook
still looks extremely fragile and uncertain."
Lufthansa shares LHAG.DE gained 3.4% as its supervisory
board approved a 9-billion- euro government bailout even as it
forced the German airline to give some of its prized landing
slots to rivals. France's biggest private TV operator TF1 TFFP.PA jumped
6.7% as it announced the launch of a new soccer channel
'Telefoot' along with its partner MediaPro Group. Norway's Seadrill SDRL.OL sank 15.0% after writing down
$1.2 billion on the value of its oil drilling rigs and warning
that it may have to convert a part of its $7.4 billion in debt
into equity to survive. = 0.8945 euros)