European shares edge ahead led by Ryanair, William Hill; energy stocks down

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* STOXX 600 up 0.2 pct, DAX outperforms after IFO survey

* Ryanair rallies on bullish outlook

* William Hill (Other OTC: WIMHF - news) surges on bid interest

* Monte Paschi plunges as stress test result looms

* Oil & gas index biggest sectoral faller

By Sudip Kar-Gupta and Danilo Masoni

LONDON/MILAN, July 25 (Reuters) - European shares inched higher on Monday, with low-cost airline Ryanair climbing after it issued a bullish outlook while shares in William Hill surged on bid interest from its rivals.

The pan-European STOXX 600 index rose 0.2 percent, but came off earlier highs as oil & gas shares extended losses after crude prices fell to 2-1/2-month lows.

Germany's DAX rose 0.5 percent after the IFO business morale survey showed the resilience of Europe's biggest economy to the turmoil triggered by UK's vote last month to quite the European Union.

Even (Taiwan OTC: 6436.TWO - news) though the IFO reading fell to 108.3 in July from 108.7 in June, it still came in stronger than the Reuters consensus forecast for a reading of 107.5.

"For the time being, it seem almost like business as usual for the German economy. German businesses seem to be handling the current period of political uncertainty well," economists at Berenberg said in a note.

Ryanair rose 6.3 percent after the low-cost carrier said it remained on track for its highest-ever profit this year, although it also warned it may yet have to review guidance since Brexit had created huge uncertainty.

"The company is cautious on the impact of Brexit and we expect it to continue to offer deep discounts through the rest of the year to keep cabins full," said Cantor Fitzgerald analysts.

"Nonetheless, these results demonstrate the resilience of the Ryanair business model and we expect consensus forecast to be unchanged at this time," they said.

William Hill jumped 4.8 percent after online gambling group 888 Holdings and casino operator Rank Group said they were joining forces with a view to making a bid.

Shares (Berlin: DI6.BE - news) in French household equipment company SEB rose 7 percent to a record high after its interim results.

Monte dei Paschi (Milan: BMPS.MI - news) di Siena was the top loser on the STOXX 600, down 8.3 percent, amid concerns over an expected rights issue at the Italian bank ahead of the results of a Europe-wide bank stress test on Friday.

Europe's energy index fell 2.1 percent, making it the biggest sectoral faller with weaker crude prices sending oil majors such as Royal Dutch Shell (Xetra: A0ET6Q - news) , Total (LSE: 524773.L - news) and Eni (LSE: 0N9S.L - news) down between 1.4-2.2 percent.

The STOXX 600 index is up some 10 percent from a low point reached in June after the Brexit vote, although the index remains down by nearly 7 percent so far in 2016.

The STOXX 600 index's recent rally has also started to stall slightly over the last week, and strategists at Goldman Sachs (NYSE: GS-PB - news) remained cautious over the near-term outlook for the market.

"Stretched valuations, lacklustre growth, political uncertainty and pressure on financials could weigh on equities," Goldman Sachs wrote in a note. (Editing by Tom Heneghan)