* STOXX 600 up 1.2 pct
* Casino gains 4 pct on Amazon partnership
* H&M tumbles 6.8 pct after Q1 results (Updates prices, adds quotes, details)
LONDON, March 27 (Reuters) - European shares surged on Tuesday on incipient signs of a detente in trade rhetoric between Washington and Beijing, while French supermarket Casino was boosted by a grocery delivery partnership with Amazon.
The STOXX 600 index gained 1.3 percent with all sectors rising, on track for its best day in seven weeks, while Germany's DAX led with a 1.6 percent rise.
European markets took their cue from a robust rebound on Wall Street and Asian stocks after reports the United States and China were negotiating to avert a trade war.
It marked a sharp bounceback from the previous days, in a sign that volatility was returning to stock markets.
"The volatility that we're seeing in markets reflects those who were initially fearful of the headlines, and those that see opportunities within that," said Chris Dyer, director of global equity at Eaton Vance.
Dyer remains overweight European stocks and underweight the U.S.
"What we see in Europe is valuations are lower, whereas the opportunity for margin expansion is more significant," he said, adding there is a "fair dispersion" between European and U.S. valuations.
He said he had added to some industrials stocks that had suffered due to the fear of trade wars.
Autos,, chemicals, tech and basic resource sectors led gains after having suffered the most from fears of increased protectionism.
Casino shares jumped 4 percent after its grocery chain Monoprix said it would start selling its products to Parisian customers through Amazon's Prime Now service this year.
Bernstein retail analyst Bruno Monteyne said the deal was unlikely to be a "game changer" to competition in the French grocery market.
"In the UK Amazon Prime Now has been selling Morrisons products for two years and is hardly measurable (0.07 percent of the UK market and growing at the paltry 50 percent)," he wrote in a note to clients.
Despite Casino's share price gains, the retail sector index lagged the market. Amazon's expansion into Europe has struck fear into investors in some supermarket stocks seen as less adapted to a new retail environment.
A 6.5 percent fall in H&M shares also dragged retail stocks down. The Swedish fashion firm flagged further markdowns in the second quarter, reporting profits for Q1 fell roughly as expected.
The losses took H&M shares to their lowest in 13 years, trading at 119 Swedish krone, around a third of their value at their peak in March 2015.
Akzo Nobel shares gained 3.8 percent after the paint maker sold its specialty chemicals business to U.S. private equity firm Carlyle Group and Singapore's GIC for 10.1 billion euros ($12.6 billion) and said the bulk of the proceeds would go to shareholders.
Among tech stocks, chipmaker ams led gains, rising 3.4 percent, while peer Infineon led the DAX with a 2.7 percent gain, and STMicro climbed 2.2 percent.
These semiconductor stocks have been the best-performing of the tech sector, leading last year's equity rally.
(Reporting by Helen Reid Editing by Kit Rees and Peter Graff)