Europe close: Stocks bounce back, led by defensive issues

European stocks bounced back from early Monday blues – led by defensive issues - after the region’s unemployment rate fell to its lowest since 2011, though the war of words about Greek debt broke back into the headlines.

The euro-sterling rate rose above the 0.80 mark for the first time since December 2014, while trade-weighted sterling fell to 84.1, its lowest since December 2013, amid continuing market chatter about the rising risk of Brexit.

European Central Bank executive board member Peter Praet also came out to say that the ECB will act "forcefully" if required to counter low levels of inflation.

By the closing bell the benchmark DJ Stoxx 600 was 0.40% higher at 334.49, with Germany's Dax-30 rising 0.28% to 9,822.08, France's Cac 40 up 0.53% to 4,345.22, but Italy's Mib declined 0.77% to 17,639.26 while Spain's Ibex 35 drifted Iower by 0.06% to finish the day at 8,597.50.

Nonetheless, it was the more ‘defensive’ or less economically-sensitive issues which paced gains, with the Stoxx 600 gauge for the sector rising by 1.88% to 701.69.

Telecoms stocks were walloped after a failed merger attempt between between Bouygues and Orange. Shares in Bouygues were 13.45% lower to €30.42 and those in Orange by another 6.17% to €14.45.

The DJ Stoxx 600 telecommunications sub-index retreated 2.45% to 332.40.

Economic optimism?

February's euro-area unemployment rate improved to 10.3% from January's 10.4%, while for the European Union it remained 8.9%.

This helped buoy investors after a meagre rise in Sentix investor confidence number, a widening decline in factory gate prices and a new Greek debt row.

Greece was back in the news after an alleged leak about International Monetary Fund tactics to up the ante on Greece to bring about a new bailout deal.

IMF managing director Christine Lagarde said on Sunday that her staff would not push Greece closer to default as a negotiating tactic, though the Greek Prime Minister's office said on Monday that a bailout review should be concluded immediately "without unrealistic demands for additional measures beyond those set out in the July bailout agreement".

German financial ministry spokesman Martin Jaeger said the review was expected to be completed by late April and a Greek debt 'haircut' was not up for debate.

Analyst Brenda Kelly at London Capital Group said Greece was considered only a light event risk against the backdrop of the falling Eurozone unemployment levels.

Oil prices were in the red but off their lows, though weakness in the Japanese yen was another potential risk factor some analysts said.

"In the absence of any major catalysts in the markets at the start of the week, it seems equities are continuing to be lifted by the prospect that US interest rates will remain lower for longer," said analyst Craig Erlam at Oanda.