* Auto stocks outperform, broker ratings help
* Italian benchmark, bank stocks rise on prime minister's comments
* European tech stocks pare losses but end lower
* Sources say U.S. gov't preparing to investigate some U.S. tech firms
(Updates to close, recasts, adds quote, graphic)
By Aaron Saldanha
June 4 (Reuters) - European shares rose on Tuesday to distance themselves further from a 3-1/2 month low hit during the previous session, aided by auto stocks which gained on broker recommendations.
The region's exchanges 0#.INDEXE shook off early weakness from the technology sector .SX8P , which trimmed losses to end 0.2% lower. Sources said the United States is gearing up to investigate whether giants including Facebook Inc FB.O and Amazon AMZN.O misused their market power. STOXX 600 .STOXX rose 0.7%, with Germany's DAX adding 1.5%, while the FTSE 100 .FTSE gained 0.4%. .L
Stocks of auto-makers and their suppliers .SXAP saw their best day in more than two months, rising 3.2%, with brokerage RBC starting coverage on a slew of names in the sector. best performing stocks in Europe today have a short squeeze flavour, but equally a lean toward value-style bargain hunting ... auto parts (are) also rallying," said a trader, pointing to Hella HLE.DE and Continental AG CONG.DE , which surged 5.4% and 3.2%, respectively.
Daimler DAIGn.DE gained 4.1%, supported by RBC starting coverage with an "outperform" rating.
Volkswagen VOWG_p.DE , which RBC also rated "outperform", added 3.3%. Sources told Reuters the firm is likely to launch the sale of transmissions maker Renk ZARG.F in the autumn, aiming to free up funds to invest more in electric vehicles. FTSE MIB .FTMIB and the country's banks .FTIT8300 rose 1.8% and 2.4%, respectively. Yields on the sovereign's bonds fell as traders cited comments by Prime Minister Giuseppe Conte, who said the government had to abide by EU budget rules until such time as they could be changed. in Italy have been under pressure over the last month, hurt by the country's differences with the European Union, a possible 3 billion euro ($3.37 billion) fine and concerns about its debt burden. banks .SX7P rose 2.1%. The sector's juicy 5.9% dividend yield, as per Refinitiv Eikon data, makes it a far riskier holding compared to safe-haven German bonds, whose yields are negative up to at least the 10-year maturity.
There is growing speculation the European Central Bank could shift to a more dovish footing at next week's policy meeting, albeit leaving rates unchanged. and beverage stocks .SX3P fell 1%, with losses led by Oslo-listed fish farmer SalMar ASA SALM.OL and seafood processor Mowi ASA MOWI.OL dropping 5% and 2.6%, respectively.
($1 = 0.8898 euros)
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Select Italian banks' performance in the 1-month through Monday
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