Europe close: Buyers and sellers vie for dominance in stock markets

Stocks on the Continent finished the session on a mixed note amid rising bets for interest rate moves from central banks that weighed on equities in the periphery.

"While it has yet to match the volatility we saw last week, a hard-fought battle between buyers and sellers is taking place amid an environment of declining liquidity," said IG chief market

The pan-European Stoxx 600 was up 0.68% at 465.28, but Milan's FTSE Mibtel dropped 1.03% to 26,328.93 and Madrid's Ibex 35 dipped 0.36% to 8,558.40.

In the background, Italian and Spanish longer-term public debt was under pressure after European Central Bank governing council member, Klaas Knot, conceded that official short-term interest rates were likely to rise in the fourth quarter.

For her part, in remarks to the European Parliament, his boss, Christine Lagarde, said that any interest rate hikes would be gradual.

On the flip-side, equity strategists at J.P. Morgan told clients that the cycle "was far from over".

"We believe that equities still offer supportive risk-reward, and that the cycle is far from over. We look for more gains in earnings, bottoming out in China activity, after being cautious on the space last year, and expect the Fed not to turn ever more hawkish, relative to what is currently priced in," J.P. Morgan's Mislav Matejka said in a research note sent to clients.

Meanwhile in Germany, industrial production dipped in December, according to official data, as supply chain bottlenecks and a fall in construction hampered Europe’s largest economy at the end of last year.

The Federal Statistics Office said the country’s industrial output fell by 0.3% on the month after an upwardly revised increase of 0.3% in November.

In equity news, shares in French automotive group Faurecia gained as the company said it was targeting sales of more than €33bn in 2025, at an operating profit margin of more than 8.5%.

Flutter Entertainment rose following reports over the weekend that it was launching a last-minute bid for the operating licence of the UK's National Lottery.