(Reuters) – European shares ticked higher in thin trade on Monday as surprisingly positive data from China helped weather a hit from the latest round of tit-for-tat tariffs between the United States and China that came into effect over the weekend.

China’s factory output unexpectedly expanded in August, the Caixin/Markit Manufacturing PMI showed on Monday, compared with an official report on Saturday that showed a contraction. However, both surveys pointed to weak orders and faltering business confidence due to the trade war.

“Chinese Caixin is probably the key thing, it’s just looking like it’s a bit more positive than we thought,” said Markets.com analyst Neil Wilson.

“It’s maybe a short-term bounce. Markets were heavily sold in August,” he said, warning against reading too much into the day’s moves given low volumes because of a U.S. holiday.

Meanwhile, euro zone manufacturing activity contracted for the seventh month in August as a continued decline in demand sapped optimism, a survey showed, likely strengthening expectations for monetary easing from the European Central Bank next week.

The pan-European stocks benchmark STOXX 600 index rose 0.3% by 0838 GMT, beginning September higher after a 1.6% drop in August as the trade war, which has roiled financial markets and raised global recession fears, entered a second year.

Trade-sensitive German shares .GDAXI traded flat as Washington’s 15% tariffs on Chinese goods came into effect on Sunday, while China began to implement new duties on a $75 billion target list. Investors may be shrugging off the tariffs as they were expected, Markets.com’s Wilson said.

U.S. President Donald Trump said both sides will still meet for talks later this month.

Trade reliant sectors like technology stocks, autos .SXAP, lagged, and commodity-linked stocks turned to losses after initially leading gains in the region on a surge in iron ore prices.

Leading the rally were defensive plays such as healthcare .SXDP, utilities .SX6P and consumer staples like the food and beverage .SX3P sector, which investors tend to turn to during times of uncertainty.

London’s FTSE 100 .FTSE outperformed, up 0.9% with a weak pound helping its exporters, followed by a 0.6% rise in Italy’s MIB .FTMIB.

In corporate news, German real estate firm Aroundtown SA (AT1.DE) was among the top gainers, up 2.4% after rival TLG Immobilien (TLGG.DE) said it is evaluating a potential merger with Aroundtown buying a nearly 10% stake in the company for about 1.02 billion euros.

British pharma company AstraZeneca Plc (AZN.L) rose on positive late-stage study results and a target price hike by Deutsche Bank.

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