By Susan Mathew
(Reuters) - European shares handed back gains to close flat on Thursday after comments from the White House undid optimism over a potential Sino-U.S. trade deal, while a strong rally in shares of chemicals giant Bayer propped up German equities.
The pan-European STOXX 600 index <.STOXX> rose as much as 0.4% earlier in the day, spurred by signs overnight of progress between Washington and Beijing in resolving their trade dispute that has roiled markets for the past year.
However, White house adviser Larry Kudlow said on Thursday no specific agreements had been made ahead of talks between U.S. President Donald Trump and his Chinese counterpart Xi Jinping this weekend and Washington was still insisting on structural changes on intellectual property and enforcement mechanisms.
Another Trump administration official also told Reuters that lifting sanctions on Chinese telecom equipment maker Huawei Technologies seemed unlikely.
Analysts warned against excessive optimism.
"China is unlikely to make more concessions than they have already made and certainly they will not make the type of concessions that Trump is expecting and eventually the trade war will resume," said Simona Gambarini, a markets economist at Capital Economics in London said before the White House comments.
Losses were led by the real estate <.SX86P> and energy <.SXEP> sectors, down 1.1% and 0.8% respectively.
While most major country indexes in the region closed flat to lower, Germany's trade-sensitive DAX <.GDAXI> outperformed, up 0.2%, boosted by Bayer's 8.7% rally.
Bayer
The biggest gainer on the STOXX 600 index was H&M
Its upbeat tone drove a 2.2% rise in the retail sector.
On the flip side, Chr Hansen
(Reporting by Amy Caren Daniel and Medha Singh in Bengaluru; Editing by Bernard Orr and Mark Potter)