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Jan 8 Reuters European shares edged lower on Monday, extending their lacklustre start to the year as tepid energy shares dragged the index, while a rise in government bond yields weighed on risk sentiment.

The panEuropean STOXX 600 moved 0.3 lower by 0915 GMT, extending the previous week39;s decline of 0.5.

European oil and gas stocks dropped 1.7 to weigh the most on STOXX 600, as crude prices dipped following sharp price cuts by top exporter Saudi Arabia and a rise in OPEC output.

Adding to the sector39;s declines, Shell lost 2.0 after the oil giant flagged impairment charges of about 2.5 billion to 4.5 billion for the fourth quarter.

Fading expectations of an early rate cut in the U.S. has kept the dollar and government bond yields supported, with the yields on the European 10year benchmark note and the German 10year up for a third consecutive session.

The evidence is that economic growth is responding to rate hikes. But it doesn39;t mean that inflation is going all the way back to where central banks want it to be necessarily this year, said Andrew Bell, CEO of Witan Investment Trust.

Analysts also flagged that the impending fourthquarter earnings season in the U.S. and the inflation report, due on Thursday, will help set the tone for equity markets.

Meanwhile, data showed German…