Italian banks lift European shares, Madrid hit by political uncertainty

European shares edged marginally higher led by a push from Italian banks and upbeat industrial data from China while markets assessed the likely return of Socialist Pedro Sanchez as Spain's prime minister.

The pan-European STOXX 600 index edged higher by 0730 GMT, with Italy's FTMIB inching higher after S&P affirmed the country's sovereign ratings but Spain's IBEX lagged on uncertainty related to a government formation at the centre. Spanish Prime Minister Pedro Sanchez is set to regain power after his Socialists overcame a historic challenge by right-wing nationalists but will need the help of regional parties, or the centre-right, to form a government.

In earnings, Spain's state-owned lender Bankia climbed 2 per cent as after the company's net profit for the first quarter came in slightly ahead of expectations. SMCP rose 5 per cent after the French fashion group reported a rise in first-quarter revenues on Monday and kept its guidance for higher annual sales growth and stable profit margins.

SAS slipped 5 per cent after the Scandinavian airline cancelled more than 1,200 flights scheduled for Monday and Tuesday as a pilot strike entered its third day on Sunday. Oil stocks lagged after President Donald Trump demanded that producer club OPEC raise output to soften the impact of U.S. sanctions against Iran.

Bayer dropped about 2 per cent as shareholders rebuked the German drugmaker's top bosses amid anger over a stock price slump as litigation risks mount from the takeover of seed maker Monsanto. Bayer which has lost more than a third in market value since August was also trading ex-dividend on the day.

Asian shares rebounded overnight after strong first-quarter U.S. economic growth numbers and the data showing profits at Chinese industrial firms grew for the first time in four months. Market participants will watch out for a meeting of the U.S. Federal Reserve and Chinese factory data this week for further clues on policy direction in the world's largest economies.