European shares end April on a high as Sainsbury/Asda merger shakes up retail

* STOXX 600 up 0.1 pct

* Best month since 2016 for European stocks

* Sainsbury's up 15 pct after merger with Asda announced

* Deutsche Telekom rises on T-Mobile US - Sprint merger

* AccorHotels boosted by Movenpick acquisition (Updates prices, adds details)

By Helen Reid

LONDON, April 30 (Reuters) - A multi-billion pound merger between British supermarket Sainsbury's and Asda shook up retail stocks on Monday while European benchmarks ended April with their strongest monthly gains since 2016.

The pan-European STOXX index rose 0.1 percent while Germany's DAX gained 0.3 percent, buoyed by investors' improved risk appetite as inter-Korea tensions eased and companies delivered strong earnings

The regional benchmark delivered a 3.8 percent gain in April, its strongest month since December 2016, after suffering losses in February and March - testament to renewed investor optimism after a volatility shock in February rattled markets.

On the day, all eyes were on Sainsbury's, whose shares closed up 14.5 percent after it agreed to merge with Walmart's Asda to create Britain's biggest supermarket group by market share.

The stock was on track for its best one-day gain ever.

"The merger, if successful, creates a retail giant in the UK with enough procurement and distribution scale to dominate food retail and challenge Amazon in non-food," said Berenberg analysts.

The said that Walmart's scale, the e-commerce capabilities of Sainsbury's Argos chain, and the potential synergies between food and non-food retail might be able to challenge Amazon's e-commerce dominance in the UK.

Tesco, which would be overtaken as UK leader by the new merged group, fell 0.9 percent on the news. Morrisons slipped at the opening but finished 1.3 percent higher.

The reaction among European retailers was mixed, too. France's Carrefour gained 0.9 percent and Casino rose 1 percent while Ahold Delhaize declined 0.4 percent.

In other deal news, Deutsche Telekom shares ended the day down 0.7 percent, having earlier risen to the top of the DAX after the German firm clinched a $26 billion deal to merge T-Mobile US and Sprint.

AccorHotels rose 1.9 percent after the French hotel chain agreed to buy rival Movenpick Hotels & Resorts for $567 million.

In results-driven moves, the world's biggest advertising group, WPP, surged 8.6 percent after reporting forecast-beating sales in its first results without founder Martin Sorrell.

The agency's gains boosted the pan-European media sector by 1.4 percent to a three-month high.

A drag on the banking sector was Sweden's SEB, which tumbled 4.5 percent after reporting first-quarter profit below market expectations as cautious corporate customers and a seasonal slowdown hampered earnings.

French construction materials firm Imerys also fell 5.2 percent after reporting results.

Glencore dropped 5 percent after mining subsidiaries in the Democratic Republic of Congo were served freezing orders for alleged unpaid royalties of nearly $3 billion.

Overall, Europe's first-quarter results season has kicked off relatively weakly, particularly compared to the first quarter of 2017.

Earnings have surprised negatively, on average, in the banking sector, while commodity-related sectors have reported surprisingly strong results thanks to higher materials prices, according to Goldman Sachs.

Societe Generale analysts struck a note of caution about investors' high expectations of earnings. "Optimistic consensus earnings growth for the next three years could be a source of disappointment," they wrote in a note entitled "Reality check". (Reporting by Helen Reid; editing by Julien Ponthus and Kevin Liffey)