* FTSEurofirst 300 up 0.02 percent, ends at session low
* Thin volumes as UK markets closed for public holiday
* DAX seen ripe for pull-back after brisk 2-week rally
By Blaise Robinson
PARIS, May 2 (Reuters) - European shares made slight gains in thin holiday trade on Monday, as merger deals and news of Osama bin Laden's death helped push the market to a two-month closing high.
Shares in Demag Cranes rose 24 percent after U.S. construction machinery maker Terex Corp unveiled a $1.3 billion hostile bid for its German rival.
Meanwhile Danish food ingredients and enzymes firm Danisco gained 4.3 percent after its board urged shareholders to accept DuPont's sweetened $6.64 billion bid.
"I'm dropping strategies using volatility or sector themes to focus on building baskets of undervalued stocks across all sectors that might soon become takeover targets," said David Thebault, head of quantitative sales trading, at Paris-based Global Equities.
"Even if we get a pull-back on the market, it won't stop the M&A wave."
The FTSEurofirst 300 index of top European shares closed 0.02 percent higher at 1,157.00 points, gaining ground for the eighth consecutive session, although the index closed at the session's low.
Bin Laden was killed after a decade-long hunt for the al Qaeda leader, reducing investors' perception of geopolitical risk.
"The death of bin Laden is important news for markets," said Laurent Baudoin, chief executive of Paris-based Stelphia Asset Management, which has 230 million euros ($342 million) under management.
"Risk aversion should recede, which should be positive for equities while it may have a less favourable impact on commodities, particularly gold."
Across Europe, France's CAC 40 gained 0.1 percent, while Germany's DAX rose 0.2 percent to its highest closing level in more than three years.
However, trading was muted as UK markets remained closed for a public holiday, with the volume on the CAC and DAX representing respectively 57 percent and 80 percent of their 90-day daily average volumes.
Both benchmark indexes ended at their session's lows, signalling an exhaustion of the recent sharp rally.
The DAX's relative strength index (RSI) hit 71.5 on Monday -- with 70 and above considered "overbought" -- while the chart's slow stochastic and moving average convergence divergence (MACD), short-term trend indicators, showed the index was poised for a retreat after a sharp rally.
"The index is getting strongly overbought, and there were three gaps left open over the past two weeks. There will be a technical correction and a bout of profit taking at some point," said Gilles Borrel, the Paris-based head of technical analysis at First Finance.
Commerzbank led the DAX with a 3.2 percent gain on forecast-beating first quarter earnings, while Swiss company Actelion was one of the biggest losers, falling 8.7 percent after the company said it may appeal against a jury's decision in a Californian court to award Asahi Kasei Pharma Corporation up to $547 million in a dispute with one of its units. (Editing by Greg Mahlich)