* STOXX 600 up 0.5 percent
* FTSE down 0.45 pct,
* Sterling rallies on softer Brexit hopes (Adds closing prices)
By Josephine Mason
LONDON, Feb 26 (Reuters) - Fading optimism about U.S.-China trade talk weighed on European shares at the start of the session on Tuesday but a rising Wall Street lifted sentiment, while London’s FTSE 100 lagged the broader markets as the sterling rallied.
The pan-European STOXX 600 closed up 0.5 percent to reach its highest level since the beginning of October and most continental bourses crossed the finish line in the black.
The FTSE 100 lost 0.45 percent as sterling rallied to a five-month high against the dollar. Investors ramped up bets that a no-deal Brexit could be avoided after Prime Minister Theresa May offered lawmakers the chance to vote on delaying the process.
With the majority of its companies’ income coming from abroad, the FTSE 100 is often pressured by a stronger pound.
On the other hand, a higher sterling gives an accounting edge to domestically focused companies which make most of their revenues in pounds. The FTSE 250 rose 0.15 percent.
On Wall Street, the benchmark S&P 500 index and the Nasdaq quickly cut all losses to eke out slight gains, after a report from the Conference Board showed a higher-than-expected rise in the consumer confidence index in February.
Among individual moves, Britain’s Metro Bank lost more than 15 percent after announcing plans to raise 350 million pounds ($464 million) in a shareholder cash call a month after announcing a sharp rise in exposure to higher-risk mortgages.
Other British companies accounted for the sharpest moves.
Travis Perkins jumped 12.5 percent after reporting better-than-expected pretax profit while Ocado surged 11.7 percent after announcing talks to form a joint venture that would give M&S a full online food delivery service for the first time.
In Germany, BASF rose 2.3 percent after the German chemicals giant delivered slightly better-than-expected profits, even though they plunged nearly 60 percent due to weak results at its petrochemcials unit.
Peugeot owner PSA lost close to 3 percent. Dealers said investors locked in profits after the French carmaker’s record results. (Reporting by Josephine Mason, additional reporting by Helen Reid Editing by Jon Boyle and Peter Graff)