European shares edge higher as investors tread lightly

By Agamoni Ghosh

(Reuters) - European shares inched higher on Monday, as investors returned to riskier assets after a volatile week highlighted by U.S.-China trade tensions and Italy's political turmoil, while a bidding war for German lighting group Osram led corporate news.

The pan-European STOXX 600 index (STOXX) pared earlier gains, moving 0.2% higher with the technology (SX8P) and chemicals (SX4P) sectors leading gains.

Trading volumes were light as most key markets in Asia were closed for certain holidays.

But investors were still hesitant to make bold moves as worries of the prolonged U.S.-China trade spat still hovered over markets - with no sign of a truce in sight. This past weekend, Goldman Sachs (NYSE:GS) warned that a trade deal was unlikely before the 2020 U.S. presidential election.

The latest salvos between Beijing and Washington have increased fears about a further slowdown of the already fragile global economy, with dire industrial output data from Germany and the UK economy's first contraction since 2012 adding to growth pangs.

"Don't think there is any renewed positivity for any of the situations (trade, growth worries, Italy) but since a lot of negativity was baked in last week, it seems fairly quiet today," said Craig Erlam, senior market analyst at Oanda.

Market attention this week will be on the German economy's growth numbers due on Wednesday and the U.S. Federal Reserve's annual symposium later in the week, where investors hope to get some clarity on the future path of interest rates.

On the corporate front, the bidding war for Osram (DE:OSRn) got more intense after Swiss-listed sensor specialist AMS (S:AMS) said it was ready to pay 10% more than Bain Capital and Carlyle (O:CG).

Osram, which is grappling with weakness in the automotive industry and a broader economic slowdown, is seen as a potential supplier for connected and autonomous cars.

Osram shares were up 10%, while AMS shares fell 9%.

Despite lower crude prices, the oil and gas sector (SXEP) was higher as Britain's Tullow Oil Plc (L:TLW) jumped as much as 20% after it announced a major oil discovery in the Orinduik block in Guyana.

ABB (S:ABBN) was up nearly 4% and was the top gainer on the blue-chip board (STOXX50) after investors welcomed news the Swiss engineering group had poached Bjorn Rosengren from mining equipment firm Sandvik (ST:SAND) to be its next chief executive.

Among decliners, miners pushed the basic resources index (SXPP) 0.4% lower as Dalian iron ore futures slumped to a two-month low over worries of slowing demand.

Banks (SX7P) also slid with lender-heavy Madrid's IBEX 35 index (IBEX) 0.1% lower.

Thomas Cook (L:TCG), the world's oldest travel company, dropped nearly 16% after it said existing shareholders were expected to be significantly diluted as part of its rescue plan.