* Swedish Match up on $16 bln bid from Philip Morris

* ECB's Lagarde cements rate hike expectations

* Bayer drops on setback in Roundup dispute

* U.S. consumer price gains slow but inflation still hot

By Sruthi Shankar and Shreyashi Sanyal

May 11 (Reuters) - European stocks locked in gains for a second straight session on Wednesday as strong earnings and a surge in economically sensitive sectors boosted sentiment after U.S. inflation growth slowed sharply in April.

The continent-wide STOXX 600 index .STOXX rose 1.7%, registering its biggest one-day percentage gain since late March. Miners .SXPP , automakers .SXAP and oil & gas .SXEP gained more than 3% each.

A handful of upbeat earnings reports and merger activity kept investor sentiment firm for the day.

Swedish Match SWMA.ST jumped 9.0% after Philip Morris International Inc PM.N said it was making a recommended cash offer for the Swedish tobacco company of about 161.2 billion Swedish crowns ($16 billion).

German conglomerate Thyssenkrupp TKAG.DE surged 11.2% after it raised its outlook for sales and operating profit for 2022, while British catering company Compass Group CPG.L climbed 7.4% on lifting its annual revenue forecast.

The recovery in mood followed a sharp selloff in global equity markets this month on worries over aggressive monetary tightening and lockdowns in China fuelling economic slowdown, pushing the STOXX 600 to a two-month low on Monday.

The index is down 5% so far this month.

"There are worries about high inflation and whether that leads to a recessionary environment. And you combine that with what's going on in China in terms of the lockdowns, it's bit of a mixed bag," said Chi Chan, a portfolio manager at Federated Hermes.

The European Central Bank is likely to end its bond-buying stimulus programme early in the third quarter of this year, followed by a rate hike that could come just "a few weeks" later, ECB President Christine Lagarde said on Wednesday.

Data showed U.S. consumer price growth slowed sharply in April as gasoline prices eased off record highs, suggesting that inflation has probably peaked. But it is likely to stay hot for a while, keeping the Federal Reserve on track to raise interest rates.

"When the dust settled, traders focused on the fact that both the headline and the core reports slipped on the month so that removed much of the fear about the prospect of large rate hikes being introduced," said David Madden, market analyst at Equiti Capital.

French train maker Alstom ALSO.PA fell 5.2% after comments on cash flow generation and guidance divided the market.

Bayer BAYGn.DE dropped 6.2% after the Biden administration asked the U.S. Supreme Court not to hear the German agriculture and pharmaceutical company's bid to dismiss claims by customers who contend that its Roundup weedkiller causes cancer.
Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Vinay Dwivedi, Arun Koyyur and Gareth Jones