* STOXX 600 up 0.2 pct as tax reform bill anticipated
* Dialog Semi rises after Tsinghua increases stake
* Ryanair enjoys relief bounce
* Old Mutual gains on Buxton UK sale (ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon, see cpurl://apps.cp./cms/?pageId=livemarkets)
By Helen Reid
LONDON, Dec 19 (Reuters) - European shares followed U.S. and Asian markets higher on Tuesday as investors awaited a long-anticipated U.S. tax reform bill which looks almost certain to pass this week.
The pan-European STOXX 600 .STOXX rose 0.2 percent to a five-week high, maintaining Monday's momentum, although gains were more muted, with euro zone stocks and blue-chips .STOXX50E up 0.1 percent.
Britain's FTSE 100 gained 0.3 percent, boosted by its weighting towards defensive, high dividend-paying stocks which investors favour when they sense uncertainty.
"The tax reform is driving equities. In our view, the risks are limited and the reform will now pass," said Valentin Bissat, equity strategist at Mirabaud Asset Management.
Leading stock moves was chipmaker Dialog Semiconductor DLGS.DE , jumping 7.7 percent after Tsinghua raised its stake in the company further to 9 percent. Unigroup has been adding to its stake since Dialog shares plunged in November on a report the power management chip maker might lose its biggest client, Apple AAPL.O .
Shares in AMS AMS.S , another chipmaker, rose 3 percent, but this wasn't enough to boost the tech sector, which fell back 0.1 percent. The highly-valued tech sector has weakened in recent weeks as investors shifted into bank stocks.
Shares in Anglo-South African financial services group Old Mutual OML.L gained 4.6 percent after the company said it would sell its Buxton UK wealth business to TA Associates for $800 million as part of a planned break-up. Justitia INTRUM.ST shares fell 6.3 percent after the debt collection firm said its CFO would leave the company. shares in South African retailer Steinhoff SNHG.DE rose 6.2 percent, building on a bounce from depressed levels the stock fell to as an accounting scandal broke.
Budget airline Ryanair RYA.I gained 4 percent, bouncing back after six straight sessions of losses caused by investors' concerns over the firm's decision to recognise unions.
Telecoms stocks were strong performers, boosted by a note from Morgan Stanley (NYSE:MS) arguing the industry could fare better in 2018 thanks to successful cost-cutting, stronger mobile revenue growth and lower cash tax rates.
Telcos have been among the worst performing sectors this year, down 2.5 percent from January.
Overall euro zone equities were drawing to the close of a stellar year of gains, shrugging off a strengthening euro to deliver substantial returns.
"If you look at performance in euros, European equities had a very strong year even compared to U.S. companies," said Mirabaud's Bissat, adding the difference in local currency performance was mainly down to the euro's strength.
"More importantly, it came from earnings growth rather than valuation expansion," he added.