* 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 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 gained 0.7% on signs that Fiat Chrysler Automobiles NV and Renault SA were looking for ways to resuscitate their collapsed merger plan and secure the approval of Nissan Motor Co.
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, Sabadell and Bilbao 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 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 rose after United Technologies Corp agreed to combine its aerospace business with U.S. contractor Raytheon Co, in what would be the sector’s biggest ever merger.
Basic materials stocks led gains, supported by higher copper and iron ore prices.
Capping gains, Ferguson Plc fell 4.6% after the British plumbing products distributor’s third quarter revenue missed analysts’ estimates.
Reporting by Amy Caren Daniel, Agamoni Ghosh and Susan Mathew in Bengaluru, additional reporting by Helen Reid; editing by Patrick Graham