The pan-European STOXX 600 <.STOXX> index was up 0.1 percent, with gains capped by a drop in the basic resources <.SXPP> and energy <.SXEP> sectors after oil prices gave up earlier gains. [O/R]

European blue chips <.STOXX50E> gained 0.3 percent, however, while Germany's DAX <.GDAXI> ticked 0.2 percent higher. Italian and Austrian markets were closed for a holiday.

Travel and leisure stocks led gains <.SXTP> up 0.8 percent in afternoon trading after Germany's second largest airline (>> Air Berlin Plc) filed for insolvency, its shares plummeting 32 percent.

Lufthansa (>> Deutsche Lufthansa) was the best-performing European stock, up 4.7 percent, with budget rivals EasyJet (>> EasyJet) and Ryanair (>> Ryanair Holdings plc) hot on its heels, after the German government said Lufthansa and another airline were in talks to take over some of Air Berlin's assets.

Health stocks and financials were among the biggest contributors to gains, with banks <.SX7P> trading up 0.2 percent.

The bank sector was hit particularly hard in the latter part of last week as tensions rose between the United States and North Korea.

Danone (>> Danone) gained 1 percent after a media report that the activist fund Corvex Management owned a stake in the French yoghurt maker.

Norwegian consumer publishing firm Schibsted (>> Schibsted) was the biggest faller, down 5.7 percent after hitting an eight-month intraday low, after Facebook (>> Facebook) announced new marketplace services which analysts said could threaten its classifieds business.

German potash miner K+S (>> K+S) also dropped 5 percent after saying that it was unlikely to reach its 2020 earnings EBITDA target, blaming a slow recovery of potash prices.

Analysts at UBS said that while K+S' second-quarter results were broadly in-line on depressed levels, the guidance was "uninspiring".

Europe's second-quarter earnings season is rolling to a close with 83 percent of MSCI Europe firms having already reported earnings.

Earnings are expected to grow 15 percent from the same quarter last year, or 12.8 percent excluding the energy sector, Thomson Reuters data shows.

Revenue is expected to increase 4 percent, or 2.7 percent excluding the energy sector.

"It's been a robust earnings season. However it hasn't been one that we feel justifies the high valuation of some of the European equity indices at this point in time," said Jonathan Roy, advisory investment manager at Charles Hanover Investments, adding this was causing subdued trading in some markets such as Germany's DAX.

Blackrock equity strategists said broadly positive earnings had been met with muted share price moves, while sales or profit misses prompted particularly strong negative reactions in Europe.

(Reporting by Kit Rees; Editing by Gareth Jones)

By Kit Rees and Helen Reid