European shares reversed course to close higher Tuesday after China's State Council announced that it is considering relaxing and removing restrictions on auto purchases as part of a broad move to boost consumption.

The pan-European Stoxx 600 finished 0.5% higher provisionally, with auto stocks receiving a boost from the Chinese announcement as almost every sector closed in positive territory. China also said it will encourage credit support for purchases of new energy vehicles and smart home appliances.

Investors are monitoring the potential recommencement of U.S.-China trade talks and unfolding developments in Italian politics. Market sentiment appeared to improve at the start of the week after President Donald Trump said on Monday that Washington officials had been in touch with Beijing over reopening trade negotiations.

But the president's remarks were subsequently contradicted by Hu Xijin, editor-in-chief of the Global Times, who said in a tweet that negotiators from both countries did not talk over the phone. Hu's tabloid is run by the People's Daily, the official newspaper of China's ruling Communist Party.

Stateside, stocks on Wall Street opened in positive territory but soon turned lower as investors digested the latest developments in the Sino-U.S. trade war.