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

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* 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)

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%.

London moved into England’s highest tier of COVID-19 restrictions, with a new variant of the coronavirus likely causing increased infection rates.

Meanwhile, 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.

But 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 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.

Miners rose as copper and iron ore prices were buoyed by upbeat factory output data from China.

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.

But 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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