European shares inch up as miners, M&A offset weak oil

By Danilo Masoni

MILAN (Reuters) - European shares inched higher on Monday as gains among miners more than offset weaker oil stocks, while fresh dealmaking activity lifted mid-caps.

Investors remained cautious ahead of Wednesday's general election in the Netherlands, and an expected U.S. rate hike, as well as a Group of 20 (G20) finance ministers' meeting on Friday.

The pan-European STOXX 600 index was up 0.1 percent. The Basic Resources index was the biggest sectoral gainer, up 2.5 percent, snapping a seven-day losing streak after copper prices surged on a soft dollar and supply disruptions. [MET/L]

London-listed miners Rio Tinto, Glencore and BHP Billiton all rose by 2.6-3.5 percent.

Crude oil prices extended their recent drop, touching a three-month low and weighing on integrated oil companies BP, Total and Eni, which fell by 0.5-1.5 percent.

The drop in Europe's Oil and Gas index, however, was limited to 0.2 percent as merger and acquisition activity provided some support.

Oilfield engineering firm Amec Foster Wheeler rallied 14 percent, topping gainers on the STOXX 600, after larger rival firm John Wood Group proposed a recommended all-share offer worth 2.2 billion pounds.

Prospects of a combination lifted shares in bidder John Wood by 5.4 percent, also buoying shares in oilfield services firms elsewhere in Europe.

"We see this as a significant transaction for Wood Group, which increases the business's diversity across sectors with the opportunity to realise significant synergies," analysts at RBC Capital Markets said in a note..

M&A activity also drove attention to British builder Bovis Homes, which surged following an approach by peer Galliford Try for an all-share merger. Bovis jumped 7.6 percent, helping Britain's mid cap FTSE 250 index hit a fresh record high.

Bovis said on Sunday it had rejected a bid approach from Galliford Try but remained in talks about a possible deal. It said it had also rejected a proposal from another suitor, Redrow.

Among notable fallers was Swiss food company Aryzta , whose shares slumped 7.4 percent after it reported a fall in net profit.

Still on the earnings front, Innogy fell 1.4 percent with traders citing a disappointing outlook from Germany's largest energy group.

(Reporting by Danilo Masoni; Editing by Susan Fenton)