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* German business morale recovers in May - Ifo
* Lufthansa and German govt agree $9.8 bln rescue package
* Lagardere jumps as LVMH's Arnault to buy stake (Updates to market close)
By Sruthi Shankar
May 25 (Reuters) - European shares rose in thin trade on Monday as a closely watched indicator of German business sentiment rebounded in May, with a slew of positive corporate updates boosting sentiment.
Germany's DAX .GDAXI surged 2.9% to its highest level since March 6, recovering nearly 38% from this year's low.
The euro zone stock index .STOXXE rose 2.1%, while the pan-European STOXX 600 .STOXX gained 1.5%. Trading volumes were lower across the board with the U.S., UK and some Asian countries closed for holidays.
A survey by the Ifo Institute showed German business morale rebounded in May after a dramatic fall the previous month, with activity gradually returning to normal after weeks of coronavirus-induced curbs. Ifo business climate index rose to a better-than-expected 79.5 from a downwardly revised 74.2 in April.
"(The) rise...is certainly good news, as it suggests that the downturn in sentiment came to a halt in May, and thus passed its trough in April," wrote Thomas Strobel, an economist at UniCredit.
"But the fact that the index did not show a stronger upward development indicates that not all companies have experienced an improvement in their economic situation yet."
Lufthansa LHAG.DE surged 7.5% after the German government approved a 9 billion euro ($9.80 billion) package and a company spokeswoman said it would resume flights to 20 destinations from mid-June. group TUI AG TUIGn.DE jumped 15.3% on plans to resume flights to main holiday destinations in Europe by the end of next month. Airbus AIR.PA gained 8.5%, while the broader travel & leisure index .SXTP was up 1.2%.
Despite growing U.S.-China tensions and worries of a resurgence in COVID-19 cases stalling a recovery for equities in recent weeks, investors focused on signs that many European economies were coming back to life.
French authorities reported the smallest daily rise in new coronavirus cases and deaths since before a lockdown began in mid-March, while Spain is set to reopen to international tourism from July, Prime Minister Pedro Sanchez said over the weekend. eyes will turn to the European Commission's recovery plan on Wednesday after EU member states Austria, Sweden, Denmark and the Netherlands stated their opposition to a French-German plan for a 500-billion euros coronavirus recovery fund. the STOXX 600, Germany's Bayer AG BAYGn.DE gained 7.8%, after saying it had made progress in seeking a settlement over claims its Roundup weedkiller causes cancer. multimedia conglomerate Lagardere SCA LAGA.PA surged 16.2% after Bernard Arnault, the billionaire behind luxury fashion group LVMH LVMH.PA , agreed to buy a stake in the holding company of fellow billionaire Arnaud Lagardere.
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But nifty not following global clue.Like 1