Europe close: Banks offset losses in oil patch

European stocks started the week on the front-foot, with a much stronger-than expected reading on the single currency area's manufacturing and services sectors helping to offset a mixed batch of corporate results and a drop in the price of oil.

Spain's Ibex 35 led the region's indices higher, gaining 1.27% to close at 9,216.20.

Over the weekend, the country's Socialist PSOE party voted to abstain in an upcoming confidence vote in parliament, paving the way for the centre-right PP party to be able to form a minority government, thus avoiding a third round of elections.

Nonetheless, Fabio Balboni at HSBC cautioned that "it won't be plain sailing as this will be a weak and small-minority government, facing many challenges ahead. The most imminent is the tussle with Brussels on the fiscal deficit."

The pan-European Stoxx 600 slipped 0.01% to 34.26, alongside gains of 0.47% for Germany's DAX to 10,761.17 and gains of 0.36% for the CAC-40 to 4,552.58.

Banks were the best performing area of the market with the Stoxx 600's gauge of lenders advancing by 1.49% as Fed funds futures crept higher in the wake of a stronger than expected reading on IHS Markit's US manufacturing gauge.

To take note of perhaps, strategists at JP Morgan upped their view on Eurozone shares from 'neutral' to 'overweight'.

The Stoxx 600 Oil&Gas sector gauge on the other hand reversed earlier gains to trade down by 0.17%.

Oil prices came under after pressure as Iraqi oil minister Ali al-Luaibi said the nation wanted to be exempt from an OPEC deal to cut production.

By the close of trading, front month Brent rcude futures were down by 1.95% to $50.79 a barrel on the ICE.

Despite that, euro/dollar was higher by 0.02% as of the closing bell at 1.0881, helped by remarks from St.Louis Fed chief James Bullard calling for just one more interest rate hike.

Markit's preliminary composite output index for the euro area jumped from a reading of 52.6 in September to 53.7 to reach a 10-month high (consensus: 52.9) amid strength in both the manufacturing and services side of the economy.

Commenting on the flash PMI data, Chris Williamson, chief business economist at IHS Markit said: “The eurozone economy showed renewed signs of life at the start of the fourth quarter, enjoying its strongest expansion so far this year with the promise of more to come. With backlogs of work accumulating at the fastest rate for over five years, business activity growth and hiring look set to accelerate further as we head towards the end of the year."

The October PMI figures were consistent with a rate of growth in euro area gross domestic product of 0.4% quarter-on-quarter and of 0.5% in the case of Germany.

There were also indications of stronger growth ahead in France, Williamson added.

In corporate news, shares in Royal Philips rocketed after the company posted third quarter operating profits of €649m, up from €570m a year ago on a 2% rise in sales to €5.9bn.

The healthcare and lighting products manufacturer also reiterated its full-year forecasts and said it was looking to sell its Lumileds lighting components arm before year-end.

UK-listed aerospace components supplier Cobham crashed lower after the outfit downgraded its full-year outlook for earnings.