By Aaron Saldanha
(Reuters) - European shares rose on Monday, led by car-makers after Fiat Chrysler and Renault (PA:RENA) confirmed they were in talks to merge, while broader trading was mainly driven by regional politics.
The STOXX 600 index rose 0.2%, with most countries' bourses posting gains after results of European parliamentary elections showed strong support for pro-European Union parties.
However, with UK and U.S. markets closed for holidays, liquidity was shallow and STOXX 600 trading volumes were the lowest seen since late August.
The calling of a snap election by Greek Prime Minister Alexis Tsipras boosted sentiment after the ruling leftist Syriza party endured a heavy defeat in the European election.
Athens-traded stocks surged 6.1%, for their best day since February 2016, on hopes that a new government would be more business friendly than the current one.
"The Greek market had not followed the valuation re-rating of European markets post 2015 given the radical nature and rhetoric of the government that we had in place," said Nick Koskoletos, head of equity research at Eurobank Equities in Athens.
"The prospect of a more pro-business government and enhanced investor prospects in Greece is helping the market play catch up."
Trading volumes in Greek stocks, which were already Europe's best performers in the year to Friday's close, were more than three times their 90-day average.
(GRAPHIC: Europe stocks in the year through Friday - https://tmsnrt.rs/2W3gqxs)
Austrian stocks recovered from earlier losses to end flat on the day after Chancellor Sebastian Kurz's government was ejected from office in the aftermath of a video sting scandal.
Fiat Chrysler pitched a finely-balanced merger of equals to France's Renault in an attempt to create the world's third-largest automaker, sending the two companies' shares up 8% and 12.1%, respectively. The auto and parts makers index rose 1.4%.
"For Fiat, which has never invested in 'green', it can be a way to tie-up with someone who already has an electric mass market presence," said a trader at a European bank.
Peugeot S.A. fell 3.3%, a move some analysts put down to Fiat preferring to seek a merger with Renault.
Stocks in Milan dipped 0.1%, led by a 1.3% fall in the local banking index after a report said Brussels was considering disciplinary action over Rome's failure to rein in public debt.
UniCredit fell 2.3% to its lowest close in more than three and a half months.