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* Chinese export and imports beat forecasts in July
* Yuan firms as Beijing signals intent to stabilize decline
* Adidas falls on lower second-quarter sales
* Carlsberg, Hargreaves rise after results (Updates to close)
By Susan Mathew and Shreyashi Sanyal
Aug 8 (Reuters) - European shares had their best day in almost two months on Thursday as upbeat trade data from China and a steadying of its currency helped to calm some fears of recession and a further escalation in Sino-U.S. trade tensions.
The pan-European STOXX 600 index rose for a second day, closing 1.7% higher, swept up in a global rally after days of turmoil sparked by an escalation in U.S.-China trade tensions last week.
All major indexes in Europe were up more than 1%, although a fall in stocks trading ex-dividend kept a lid on gains in London's FTSE.
Data showed July exports in China rose at their fastest since March, while a fall in imports was not as bad as a forecast, soothing worries that the protracted and escalating trade war will tip the world into recession.
Trade-sensitive tech and basic resources indexes led the gains, with no sector in the red.
The materials sector closed 2.5% higher, ending an 11-session losing streak during which it lost almost 16%.
The yuan recovered some ground against the dollar, although China's central bank set its official midpoint below the seven yuan to the dollar threshold for the first time since the global financial crisis.
"Today's fixing is a message the People's Bank of China has no definitive line in the sand but are only allowing the yuan to weaken on their terms and at a reasonable pace to mitigate possible outflows," wrote Stephen Innes, managing partner at VM Markets.
"So the fear of rapid depreciation is fading."
But as Sept 1 nears - the day 10% tariffs on $300 billion of Chinese imports are to take effect, traders remain cautious on the possibility that the PBoC could continue to nudge the fix lower, especially if there is no reversal in Washington's tariff position, Innes says.
The central bank had let the yuan slide to its lowest in more than a decade earlier this week, raising fears it would use its currency as the new front in its trade dispute with the United States.
These uncertainties have pushed investors into bonds and gold and prompted central bankers around the world to get ahead of the storm clouds by easing monetary policy.
On the earnings front, Zurich Insurance Group surged nearly 4% after the insurer said it was set to beat its 2019 financial targets. This sent the Swiss main index 2.3% higher in its strongest day in more than seven months.
But sportswear firm Adidas slumped 2.2% after disappointing second-quarter sales.
Danish brewer Carlsberg rose 11.3% to top Europe's main index after it raised profit expectations for 2019. British fund supermarket Hargreaves Lansdown was also up by 11.8% after a forecast-beating rise in full-year assets. (Reporting by Agamoni Ghosh, Shreyashi Sanyal and Susan Mathew in Bengaluru; editing by Patrick Graham/Saumyadeb Chakrabarty/Jane Merriman)