Europe close: Equity markets rally as oil and gas stocks lead the way

European stocks rallied on Monday, as a surge in oil and gas and basic resources stocks offset disappointing economic data from the US.

The benchmark Stoxx Europe 600 index closed up 2.94%, while Germany’s DAX rose 2.74% and France’s CAC 40 jumped 3.54%.

The euro was broadly flat against the pound and the dollar but gained 0.13% against the yen, while Brent crude rose 2.55% to $49.39 a barrel.

“The Fed and Bank of England on hold at zero rates and pressure on the European Central Bank to consider more stimulus has been, on balance, enough to outweigh growth fears,” said CMC Markets’ analyst Jasper Lawler.

On the data front, figures from Markit showed the Eurozone economy continued to grow in September, although the rate of expansion eased to a four-month low.

The final Markit purchasing managers’ index composite output index fell from 54.3 to 53.6 in September, below the 'flash' estimate of 53.9 posted last month, as the average rate of expansion failed to pick up pace in the third quarter.

Meanwhile, figures released by Eurostat showed retail sales in the euro bloc were flat in August, compared with analysts’ expectations for a 0.1% decline month-on-month. July’s rate was revised up from 0.4% to 0.6%.

Elsewhere, data released by German think tank Sentix showed investor confidence in the bloc fell to an eight-month low in October.

Across the Atlantic, the Institute for Supply Management revealed its services index declined from 59.0 in August to 56.9 last month, falling below the 57.5 reading analysts had expected.

“The September survey data show that US service sector growth has moderated in the recent months but remains solid,” analysts at Barclays said.

Energy stocks surge

In company news, ArcelorMittal rallied 8.65% after Citigroup upped the stock to ‘buy’ from ‘sell’, while Rio Tinto and Glencore also benefited from a bullish note by Societe Generale.

The latter jumped 21%, tracking a surge in its Hong-Kong-listed shares, amid media reports of healthy interest in the company’s agricultural business.

Singapore´s sovereign wealth fund, Japanese trading house Mitsui&Co. and a Canadian pension fund were among the parties who had expressed an interest in the unit, according to Bloomberg.

Swiss luxury group Compagnie Financiere Richemont rose 5.42% after it said the merger of its subsidiary, Net-A-Porter, with Yoox has been completed and will generate a one-off accounting gain of €610m to €670m.