UPDATE 2-European shares lose steam as oil stocks, Bayer drag

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* Oil slump hits shares of energy majors
* Euro zone manufacturing PMI in line with estimates
* Bayer slides on profit warning, impairment hit
* Retail stocks jump after H&M profit beat

(Updates to market close)
By Sruthi Shankar
Oct 1 (Reuters) - European stocks handed back most of their
early gains to close slightly higher on Thursday, as a slide in
oil majors and German drugs company Bayer offset a slew of
positive earnings reports.
After rising as much as 0.9%, the pan-European STOXX 600
.STOXX ended 0.2% higher, fading as oil prices slumped 5% on a
worsening demand outlook as coronavirus cases rise. O/R
Total TOTF.PA , BP BP.L and Royal Dutch Shell RDSa.L
fell between 2.4% and 3.8%, while the oil & gas index .SXEP
slid 1.7%, the biggest decliner among sectors.
European countries have seen a resurgence in COVID-19 cases,
with Madrid set to become the first capital to go back into
lockdown, while British health minister Matt Hancock introduced
more coronavirus restrictions across a wider area of England.
"Second wave effects carry a lot of uncertainty about the
growth environment," Bert Colijn, senior economist for the euro
zone at ING, said in a note.
"A new round of more national lockdowns could have a serious
impact on the labour market again, which is not our base case,
but cannot be ruled out either."
The European Union's statistics office, Eurostat, said
unemployment in the bloc rose to 8.1% of the workforce in August
from 8.0% in July, continuing an upward trend caused by the
economic downturn triggered by the pandemic. A separate survey showed the recovery in euro zone
manufacturing activity was largely as expected in September.

Globally investors clung to hopes of a fresh round of
stimulus to prop up the U.S. economy amid growing uncertainty
about the November presidential election. German stocks .GDAXI slipped 0.2%, weighed down by a 13.1%
slump in Bayer BAYGn.DE after it flagged that adjusted profit
may slip next year and it may have to write down the value of
agriculture assets by close to 10 billion euros. Among the bright spots, H&M HMb.ST surged 6.1% as it beat
third-quarter profit forecasts and announced plans to close
hundreds of stores next year as the coronavirus crisis drives
more shoppers online. The retail index .SXRP rose 2.5% to lead
sectoral gains. STMicroelectronics STM.PA jumped 6.9% after it forecast
2020 sales above previous estimates and said a sharp rise in
automotive and microcontroller demand helped preliminary
results. Banco BPM BAMI.MI gained 4.2% after sources told Reuters
that France's Credit Agricole CAGR.PA was exploring a possible
deal to buy Italy's third biggest bank.