UPDATE 2-FCA-Renault deal hopes, Mexico tariff relief lift European shares

* Trump calls off tariffs after Mexico vows to tighten
border
* FCA-Renault revival hopes boost auto sector
* Thomas Cook up as Fosun holds talks to buy tour operating
arm
* Ferguson slides on third quarter revenue miss

(Updates to close)
By Susan Mathew
June 10 (Reuters) - European shares closed higher on Monday
on some trade relief after the United States and Mexico struck
a deal to avert tariffs on Mexican goods, while European
automakers got a lift from signs Fiat-Chrysler and Renault may
revive merger talks.
The pan-regional STOXX 600 index .STOXX finished up 0.2%
on broad-based gains albeit in thin trading volumes on account
of Whit Monday holidays in Germany, Switzerland, Austria and
most Nordic countries.
The auto sector .SXAP gained 0.7% on signs that Fiat
Chrysler Automobiles NV FCHA.MI and Renault SA RENA.PA were
looking for ways to resuscitate their collapsed merger plan and
secure the approval of Nissan Motor Co 7201.T . Fiat Chrysler climbed 1.7% and Renault shares closed up 2.6%
after sources close to the companies told Reuters they were back
in discussions on ways to revive the deal.
"We believe it is too early to talk about negotiations being
re-opened," Equita analyst Emanuele Gallazzi wrote in a note.
"Today's news together with the hypotheses discussed in
various press sources relating to alternative scenarios for FCA,
including GM, Hyundai and Geely, keep high the speculative
appeal of the stock."
U.S. President Donald Trump abandoning plans to impose a 5%
import tariff on all Mexican goods in exchange for moves on
immigration was a relief to investors worried that a second
major U.S. trade dispute would drive the global economy into
recession. "The (U.S.-Mexico) deal ... will naturally be helping to
boost investor sentiment," said Craig Erlam, a senior market
analyst at Oanda.
"While this wasn't a tariff spat that had yet got underway,
the risk was very real and could have escalated very quickly."
Spanish banks with business exposure in Mexico such as
Santander SAN.MC , Sabadell SABE.MC and Bilbao BBVA.MC rose
between 1.8% and 2.9%.
But the lack of clarity on certain aspects of the U.S-Mexico
deal, and no clear sign of de-escalation in the Sino-U.S. trade
conflict, kept sentiment at bay. Heightening of trade friction between the United States and
China has taken its toll on the pace of growth in the world's
major economies, driving a nearly 6% fall in European stock
markets in May, their worst month in more than two years.
Among other regional stocks, Thomas Cook's shares TCG.L
jumped 17% after a report that Hong Kong's Fosun Tourism was in
talks to buy its tour operating business as the British group
faces breakup after issuing three profit warnings in the past
year. Defence firm BAE Systems BAES.L rose after United
Technologies Corp UTX.N agreed to combine its aerospace
business with U.S. contractor Raytheon Co RTN.N , in what would
be the sector's biggest ever merger. Basic materials stocks .SXPP led gains, supported by
higher copper and iron ore prices. MET/L IRONORE/
Capping gains, Ferguson Plc FERG.L fell 4.6% after the
British plumbing products distributor's third quarter revenue
missed analysts' estimates.