* STOXX 600 up 0.2 percent
* Oil stocks hit highest since mid-July
* Italian stocks helped by budget compromise talk
* Next shines after raising full-year guidance(For a live blog on European stocks, type LIVE/ in an Eikonnews window)
By Danilo Masoni
MILAN, Sept 25 (Reuters) - European shares were supported inmorning trading on Tuesday by gains among oil stocks, whileBritish clothing retailer Next rallied after raising itsprofit guidance.
The pan-European STOXX 600 index rose 0.2 percentby 0801 GMT, recovering part of the losses suffered in theprevious session when worries over a protracted U.S.-Sino tradewar sparked profit-taking.
Optimism over the Italian budget also buoyed sentiment.
Oil majors BP and Shell rose more than 1percent after Brent hit a fresh four-year high amid looming U.S.sanctions against Iran and an apparent reluctance by OPEC andRussia to raise output to offset the expected to hit to supply.
"Russia and Saudi Arabia essentially ignoring Trump's pleas,combined with U.S. sanctions hitting Iran's oil exports in earlyNovember means we expect fresh multi year highs for oil, whichwill also help the oil majors such as BP and Shell to gainground in the near term," LCG analyst Jasper Lawler said.
The oil and gas index led sectoral gainers, up 1percent at its highest level since mid-July.
Commodities trader and miner Glencore added 2.2percent after launching a $1 billion share buyback.
Heavyweight drugmaker Novartis rose 1.2 percentafter saying it would cut about 2,200 jobs in Switzerland overthe next four years to help boost profitability.
Top gainer on the STOXX was Next, up 8.3 percent.
The clothing retailer posted a 0.5 percent rise infirst-half profit and raised its full-year guidance afterbetter-than-expected trading in August and early September.
Signs that Italy's coalition was likely to reach acompromise over the 2019 budget lifted Italian stocks and bondswith the country's top FTSE MIB equity index up around1 percent, outperforming the broader market.
State-controlled Italian defence contractor Leonardorose more than 3 percent after it won a helicopterorder from the U.S. Air Force.
Italian banks, which are sensitive to politicalrisk due to their big sovereign bond holdings, rose 1.5 percent.Their gains helped and growing expectations of a rate hike inthe euro zone next year helped lifted the European banksup 0.7 percent.
Elsewhere, British American Tobacco fell 1.9percent after news the cigarettes maker named Jack Bowles asCEO, while rival Imperial Brands added 0.6 percentfollowing a trading update.(Reporting by Danilo Masoni;Editing by Alison Williams)
