  We present XMM-Newton observations of the young (~2-5 Myr) cluster around the
hot (O9.5V) star sigma Orionis AB, aimed at obtaining a high resolution RGS
spectrum of the hot star as well as EPIC imaging data for the whole field. We
show that the RGS spectrum of sigma Ori AB may be contaminated by weaker nearby
sources which required the development of a suitable procedure to extract a
clean RGS spectrum and to determine the thermal structure and wind properties
of the hot star. We also report on the detection of a flare from the B2Vp star
sigma Ori E and we discuss whether the flare originated from the hot star
itself or rather from an unseen late-type companion. Other results of this
observation include: the detection of 174 X-ray sources in the field of sigma
Ori of which 75 identified as cluster members, including very low-mass stars
down to the substellar limit; the discovery of rotational modulation in a
late-type star near sigma Ori AB; no detectable line broadenings and shifts
(<800 km s^-1) in the spectrum of sigma Ori AB together with a remarkable low
value of the O VII forbidden to intercombination line ratio and unusually high
coronal abundances of CNO elements.
