European shares retest August high as Syria tensions recede
* FTSEurofirst 300 up 1.3 pct, tests Aug high
* Concerns about Syria strike recede after diplomatic moves
* Car makers rally on signs European sales stabilising
LONDON, Sept 10 (Reuters) - European shares rallied to retest their August high on Tuesday as equities globally were lifted by signs that a U.S. strike on Syria, with its possible ramifications in the oil-rich Middle East, may be avoided.
Syria accepted a Russian proposal on Tuesday to give up chemical weapons and win a reprieve from U.S. strikes, easing market nerves about a possible escalation of violence in the region.
The pan-European FTSEurofirst 300 index was up 1.3 percent at 1,244.23 points by 1506 GMT, testing a high of 1,242.97 points last seen on Aug. 14. The euro zone Euro STOXX 50 index was up 1.8 percent at 2,849.47 points.
"Every side wants to defuse the tension," said Manish Singh, who helps manage more than 2.5 billion dollars worth of assets at Crossbridge Capital. He expects the Euro STOXX 50 to rise by a further 7-8 percent by the end of the year.
"I don't know whether it will work but for now we go with what we are hearing and seeing."
Airlines easyJet and Lufthansa were the top risers on the FTSEurofirst 300, up 7 percent and 5.4 percent, respectively, as the price of crude oil, one of their biggest costs, fell to a two-week low.
CAR MAKERS RALLY
Car makers also gained, rising 2.5 percent, as the bosses of major manufacturers including Volkswagen, PSA Peugeot Citroen, and Ford Europe said sales in Europe appeared to be stabilising after five years of decline, although recovery could be slow.
Shares in Volkswagen led the sector rally, surging 4.5 percent, with Daimler up 2.3 percent.
Signs of economic recovery in Europe and the United States have helped the FTSEurofirst 300 rise around 13 percent since late June.
China data also helped lift shares on Tuesday, with faster-than-expected growth in industrial output in August providing more evidence that the world's second-biggest economy is picking up after a prolonged slowdown.
The prospects of higher demand from the world's largest consumer of metals boosted the basic resources sector, which rose 2 percent.
"All our strategies are long on equities on our signals," said Johann Schwimann, partner at Seven Capital Management, a Paris-based hedge fund that invests based on algorithms that gauge factors such as economic data and indicators of market risk and momentum.