UPDATE 1-European stocks lifted by surprise rise in Chinese exports

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* Global mood steadies as China's April exports rebound

* Air France dips as it sees operating losses to widen

* UK telecoms group BT tumbles after dividend suspension
(Adds comment, updates prices)

By Sruthi Shankar

May 7 (Reuters) - European shares rose on Thursday as a
surprise rise in China's exports overshadowed another set of
grim results and a warning from Air France-KLM that demand could
take "several years" to recover.

The pan-European STOXX 600 rose 0.6%, led by gains
in retail, mining and real estate
sectors.

German online fashion retailer Zalando jumped
10.2% after saying it was recovering from an initial hit by
coronavirus lockdowns and it expects a return to profitability
as it posted a first-quarter loss.

The mood stabilised globally as Beijing reported a 3.5% rise
in April exports, confounding market expectations for a sharp
fall, as factories restarted production after the coronavirus
pandemic.

"Market reaction has generally been driven by things not
getting any worse," said Will James, deputy head of European
equities at Aberdeen Standard Investments in London.

"There's probably a bit of danger to extrapolate a similar
path of recovery within Europe and elsewhere because in China,
the state is very heavily involved."

Despite forecasts for a record 7.7% contraction for the euro
zone economy this year and a 14% plunge in Britain's economy,
European shares have held near two-month highs on hopes that
easing lockdowns will spark a rebound in economic activity.

However, the threat of a renewed Sino-U.S. trade spat has
weighed on sentiment. U.S. Secretary of State Mike Pompeo
renewed his aggressive criticism of China on Wednesday, blaming
it for the deaths of thousands of people from the coronavirus.

Some disappointing earnings forecasts also cast a shadow,
with Air France dipping 3.8% as it predicted operating
losses to widen "significantly" in April-June quarter, with 95%
of flights expected to remain grounded.

British Airways-owner IAG fell nearly 2.8% after it
warned that passenger demand would not return to previous levels
until 2023, and it would seek to defer deliveries of 68
aircraft.

Britain's largest telecoms group BT tumbled 7.1% and
was the biggest decliner on the FTSE 100 after it
suspended its dividend until 2021-22 and pulled its financial
outlook in response to the COVID-19 pandemic.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Anil
D'Silva, Bernard Orr)