European stocks gained Tuesday following strong German economic data, while a Wall Street rally fizzled on renewed worries about a new US stimulus package.

Confidence among investors in Germany soared to its highest level in almost 17 years in August, according to the ZEW institute's monthly barometer.

"Hopes for a speedy economic recovery have continued to grow, but the assessment of the situation is improving only slowly," ZEW President Achim Wambach said.

The DAX in Frankfurt rose 2.0 percent, while London and Paris also registered solid gains.

US stocks were also higher most of the day, but tanked with less than an hour left in the trading session, after the US Senate's Republican leader Mitch McConnell poured cold water on prospects for a deal on a new pandemic aid bill.

"And so another day has gone by with an impasse and they need to get together," McConnell said on Fox News.

McConnell's comments raised doubts about wide expectations that Washington will eventually produce a big fiscal package, despite tensions between President Donald Trump and Democratic congressional leaders.

But some analysts noted the market was due for a pullback.

While Europe is bracing for a flare-up in virus cases, World Health Organization boss Tedros Adhanom Ghebreyesus said it was 'never too late to turn the outbreak around'
While Europe is bracing for a flare-up in virus cases, World Health Organization boss Tedros Adhanom Ghebreyesus said it was 'never too late to turn the outbreak around' POOL / Fabrice COFFRINI

The comments were a "good excuse to tame the market as the S&P 500 came within 0.4 percent of its all-time high today," said Briefing.com.

Quincy Krosby of Prudential said the course correction was sparked by McConnell's pessimism but added: "This is a lower volume market given the summer lull, and market reactions can move higher and lower more swiftly."

Russia's announcement that it had approved a coronavirus vaccine helped fuel the optimistic mood across trading floors for a while, analysts reported, but its impact faded as authorities in other countries greeted the news with skepticism.

In Asia, shares in Next Digital, the media company owned by Hong Kong tycoon Jimmy Lai who was arrested under a Chinese security law, surged 668 percent at one point thanks to pro-democracy activists buying it.

Lai was released on bail late Tuesday.

New York - Dow: DOWN 0.4 percent at 27,686.91 (close)

As the pandemic hustles economies around the world, the US-China stand-off has been a major headache, with the two sides butting heads on several issues that have fanned worries they could renew their damaging trade war
As the pandemic hustles economies around the world, the US-China stand-off has been a major headache, with the two sides butting heads on several issues that have fanned worries they could renew their damaging trade war AFP / STR

New York - S&P 500: DOWN 0.8 percent at 3,333.69 (close)

New York - Nasdaq: DOWN 1.7 percent at 10,782.82 (close)

London - FTSE 100: UP 1.7 percent at 6,154.34 (close)

Frankfurt - DAX 30: UP 2.0 percent at 12,946.89 (close)

Paris - CAC 40: UP 2.4 percent at 5,027.99 (close)

EURO STOXX 50: UP 2.2 percent at 3,332.12 (close)

Tokyo: Nikkei 225: UP 1.9 percent at 22,750.24 (close)

Hong Kong: Hang Seng: UP 2.1 percent at 24,890.68 (close)

Shanghai: Composite: DOWN 1.2 percent at 3,340.29 (close)

Euro/dollar: DOWN at $1.1734 from $1.1738 at 2100 GMT Monday

Dollar/yen: UP at 106.50 yen from 105.96 yen

Pound/dollar: DOWN at $1.3047 from $1.3073

Euro/pound: UP at 89.94 pence from 89.79

West Texas Intermediate: DOWN 0.8 percent at $41.61 per barrel

Brent North Sea crude: DOWN 1.1 percent at $44.50 per barrel

Coronavirus Germany Russia Donald trump