MILAN: European shares bounced back on Monday as new-found optimism among investors about the new round of trade talks between Beijing and Washington lifted bourses from one-week lows.

The pan-regional STOXX 600 index ended the session up 0.9 percent after falling on Friday amid worries over an economic slowdown.

Analysts cautioned that sentiment about the trade talks was volatile and that a favourable outcome was by no means a done deal.

"As U.S.-Sino trade talks begin in Beijing we are once again seeing the markets adopt an all too familiar optimistic stance", wrote market City Index analyst Fiona Cincotta.

"The reality is that we are unlikely to see any big moves towards a deal this week", she added.

Wall Street opened cautiously.

Banks and financials had a strong session with Italian lenders leading the way after Banco BPM, UBI Banca  and UniCredit said their capital ratios met European Central Bank standards. Their shares were up 7 percent, 3 percent and 1.9 percent respectively.

Deutsche Post rose 2.5 percent on a report saying that Germany was set to grant the postal services firm a higher-than-expected increase in postage for letters to account for fewer letters sent and higher costs.

Just Eat rose 3.8 percent after its shareholder Cat Rock urged the British takeaway ordering website to start merger discussions.

Airbus shares closed up 2 percent after Goldman Sachs added the stock to its 'European Conviction' list and reiterated its "buy" rating.

British tobacco group Imperial Brands added 1.5 percent after it said its non-executive chairman Mark Williamson, whose tenure exceeds new British guidelines, would step down.

Among the few fallers was Smith & Nephew, down 3 percent, following a report it has held talks to buy U.S. medical equipment maker NuVasive in a deal that would be worth more than $3 billion.