May 27, 2019 / 7:35 AM / 4 months ago

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 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 rose 2.5%, outperforming all other sectors, as Italian-American carmaker Fiat Chrysler confirmed it made a “transformative merger” proposal to French peer Renault 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 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. (Reporting by Agamoni Ghosh; Editing by Toby Chopra)

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