UPDATE 1-European shares gain on optimism over U.S.-China trade row

* STOXX up 0.7 pct

* No worsening in Turkish lira crisis

* Sage falls on DB downgrade

* Alitalia under pressure after Genoa bridge tragedy (Adds shares, quotes)

LONDON, Aug 20 (Reuters) - Hopes that the United States and China might find a compromise to resolve their trade dispute lifted European shares on Monday, while Turkey's currency crisis showed no immediate sign of worsening.

At 0835 GMT, the pan-European STOXX 600 was up 0.7 percent at 383.7 points, with most markets across the continent gaining.

"The prospect that any possible escalation may well be some way away has prompted some investors to tentatively step back into the market," CMC Markets analyst Michael Hewson said in a note to clients.

Amid the "risk-on" environment, basic materials and miners were by far the best-performing sector, up 2.3 percent.

Among the stocks that fared best in morning trading were ArcelorMittal, up 3.4 percent and at the top of Paris' CAC 40 index and Anglo American, up 3.2 percent.

While the second-quarter earnings season nears its end, Britain's NMC Health rose 3.2 percent, at the top of the STOXX index, after publishing a trading update.

Italian infrastructure group Atlantia opened down close to 10 percent with speculation over whether the government would revoke toll highway concessions held by its unit Autostrade per l'Italia after the collapse of a bridge in Genoa last week.

British software group Sage lost 6.6 percent, after a rating downgrade of its stock by Deutsche Bank, two traders said.

"The competitive situation in Sage's core mid-market franchise appears to be worsening," the German bank's analysts wrote, adding that "higher-end competitors also appear to be gradually gaining share from Sage's core user and reseller base".

Shares in British contractor G4S fell close to 2 percent after the British government took over the running of a prison as an inspection found it had fallen into a "state of crisis".

Among smaller companies, handbag maker Mulberry sank more than 25 percent to a near eight-year low, after a trading update in which it said it sees profit "materially reduced" if current sales trends in the UK continue into the second half.

The results could be seen as a bad omen for retail and luxury peers in Britain.

"This is really a sign of how its not just the retailers that are affected by the decline on the high street, but also some of the key brands that depend on department store concessions and the visible presence they offer to consumers," wrote Neil Wilson, an analyst for Markets.com. (Reporting by Julien Ponthus and Helen Reid, editing by Larry King and Dale Hudson)