European shares rise as NAFTA deal lift sentiment (UPDATE 1)

European shares rose on Monday morning as optimism on the trade war front was lifted by a new U.S.-Mexico-Canada agreement, which is helping world markets enter the fourth quarter on a positive footing.

At 0820 GMT, the euro zone benchmark was up 0.4 per cent with most European bourses and sectors trading in positive territory.

"News overnight of a late agreement between the U.S. and Canada to salvage the NAFTA trade agreement should give a boost to global risk appetite at the start of the fourth quarter," wrote Peel Hunt strategist Ian Williams, adding the deal "may offer encouragement that the other global trade disputes can be settled satisfactorily."

Ryanair was the worst performer, down 7.5 per cent after it cut its forecast for full-year profit and said there could be worse to come if recent coordinated strikes across Europe continue to hit traffic and bookings.

The low-cost carrier's fall weighed on the wider sector which was one of the only ones in the red, down 0.6 per cent.

Peer Easyjet, Air France-KLM and BA owner IAG were down 4.1 per cent, 2.6 per cent and 1.4 per cent respectively.

Germany's Linde posted the highest rise, climbing 6.3 per cent after it received approval for its proposed $83 billion mergers with Praxair PX.N from the Chinese antitrust authorities.

French supermarket group Casino was up 0.3 per cent after it said it had agreed to sell some property assets for 565 million euros ($655 million) to reduce debt levels that have worried investors.

Italian banks were up 0.5 per cent after suffering their worst fall in about two years on Friday on fears the populist government's decision to increase its deficit target could threaten the long-term sustainability of its sovereign debt.

On Sunday, Italian daily La Repubblica reported that the European Commission was set to reject Italy's budget plans in November and open a procedure against the country's public accounts.

The Milan bourse was up 1 per cent, making it the best performer among European trading centres, as it rebounded from a 3.7 per cent drop on Friday.

(With inputs from agencies.)