European shares higher on possible Fiat-Renault merger, EU vote in focus

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May 27 (Reuters) - European shares rose on Monday as a
possible Fiat Chrysler-Renault merger thrust auto stocks higher,
while investors assessed the results of the EU parliament
elections where pro-European parties are expected to hold on to
two-thirds of seats.
The pan-European STOXX 600 .STOXX was up 0.5% by 0715 GMT
with most indices inching higher but trading volumes were thin
with UK, US markets closed for market holidays.
The auto sector .SXAP rose 2.5%, outperforming all other
sectors, as Italian-American carmaker Fiat Chrysler FCHA.MI
confirmed it made a "transformative merger" proposal to French
peer Renault RENA.PA in a deal which would create the world's
third-biggest carmaker and help address some of the weaknesses
in both companies. The proposed deal would be structured as a 50-50 ownership
through a Dutch holding company. Shares of both companies were
at top of the STOXX 600, up more than 15% each.
Meanwhile, shares of German car maker Volkswagen VOWG_p.DE
rose 2% after a German paper reported its intention to jointly
build up battery cell production in Salzgitter with Swedish
startup Northvolt. In a rather quiet day for company news investors focused on
the European Parliamentary elections where parties committed to
strengthening the European Union held on to two-thirds of seats
although far-right and nationalist opponents also saw strong
gains.
The two-party "grand coalition" of the conservative European
People's Party (EPP) and the Socialists (S&D) losing their
combined majority amid an increase in support for liberals, the
Greens and nationalists means policymaking in the EU may become
more complex.
In Asia, stocks inched up but remained near four-month lows
on Monday amid concerns about U.S.-China tensions with U.S.
President Donald Trump saying he was 'not yet ready' to make a
deal with China.
The trade war escalation this month has hit the pan-European
STOXX 600 which is looking at its first monthly decline for 2019
since a sell-off at the end of last year that knocked 15% off
the index.