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* STOXX Europe 600 index up 0.1 pct
* Temenos surges on broker upgrade
* Commodity shares in demand
By Atul Prakash and Kit Rees
LONDON, Sept 5 (Reuters) - European shares edged higher to an eight-month peak on Monday, building on the previous session's rally, with Swiss software maker Temenos leading the market upward after an upgrade by a leading investment bank.
Temenos surged 7.6 percent, closing at a record high after Credit Suisse raised its stance on the stock to "outperform" from "neutral". Credit Suisse said it expected Temenos to continue to surprise on the upside in the coming quarters, including an increase of the 2016 guidance.
"But not only do we believe that the momentum is likely to remain strong, we also have become more confident that Temenos will be one of the few structural winners in the growing core banking software market in the medium term," Credit Suisse analysts said in a note.
Telecom company SFR gained 6 percent after rival French telecoms group Altice said it planned to simplify its ownership structure by exchanging its shares for the outstanding 22.25 percent of shares of SFR that it does not already own.
Altice shares were unchanged, with Bryan Garnier saying that it retained its "buy" recommendation on Altice as the move was likely to have a positive impact on the company's earnings per share next year.
The pan-European STOXX 600 index was up 0.1 percent at its close after setting its highest level since early January and building on a 2 percent rise in the previous session, when weaker-than-expected U.S. jobs data led investors to pare back bets on an imminent U.S. interest rate hike.
Mike van Dulken, head of research at Accendo Markets, said that investors were interpreting Friday's U.S. jobs data as being inconclusive and insufficient to convince the Fed that a rate hike is warranted this month.
"Traders clearly like the idea of cheap money for longer, even if only for a few more months."
However, Monday's gains were clouded by a survey showing euro zone business growth was at its weakest since the start of last year in August, suggesting the bloc's already struggling economy is losing what little momentum it had.
Among sectoral movers, the European oil and gas index rose 1 percent as oil prices reversed losses after the dollar lost its momentum. Shares in Royal Dutch Shell increased 1.3 percent, while BP was up 0.9 percent.
However, the region's banking index fell 0.3 percent. It was pulled down by RBS and Lloyds, which lost 3.5 percent and 2.1 percent respectively.
This came after Deutsche Bank cut its ratings on both the stocks, saying it expected to see steady asset pricing pressure on UK banks, with negative consequences for net interest income and profitability. (Reporting by Kit Rees; editing by Mark Heinrich)