Europe close: Stocks edge higher, buoyed by gains in oil

European stocks were mixed on Monday, with rising oil prices offering some support as investors continued to keep an eye on the banking sector, while in the UK Brexit was in focus after Prime Minister Theresa May vowed to trigger Article 50 by March.

The benchmark Stoxx Europe 600 index and France’s CAC 40 were both up by roughly 0.1%, as German markets remained closed for a national holiday.

In parallel, Milan's FTSE Mibtel gave back 0.77% and Madrid's Ibex 35 another 0.32%.

Oil prices reversed earlier losses to trade higher as investors continued to mull over last week’s agreement by the Organisation of Petroleum Exporting Countries. West Texas Intermediate was up 0.7% at $48.58 a barrel by the closing bell, while Brent crude was 0.93% firmer at $50.66. The Stoxx 600 oil and gas sub-index rose 0.52%.

IG’s Chris Beauchamp said: “The bullish activity in markets this morning has been helped in no small measure by the closure of German markets for a holiday, which has had the beneficial effect of sparing us any Deutsche Bank headlines. The rumoured DoJ deal failed to materialise over the weekend, which might mean that the shares are due another trimming when the Dax reopens tomorrow.”

Related to Deutsche Bank's travails, on 30 September analysts at JP Morgan pointed out the recent spike in euro area banks' demand for US dollar funding - to $6.35bn - at the European Central Bank's last auction, "raising fears about funding".

"We need to wait for next week to see if this elevated dollar borrowing by euro area banks persists beyond quarter-end," they said.

Acting as a backdrop, the pound was under the cosh against both the dollar and the euro after Theresa May said at the weekend that the UK will begin the formal Brexit negotiation process by the end of March 2017 with the aim of leaving the European Union by the summer of 2019.

In her first Tory Party conference, the PM said the government would strike a deal with the EU as an "independent, sovereign" UK.

The currency got a brief boost after the release of stronger-than-expected manufacturing data, which showed activity in the sector unexpectedly improved in September, hitting its highest level since June 2014. The Markit/CIPS manufacturing purchasing managers’ index rose to 55.4 from 53.4 the month before, beating expectations for a reading of 52.1.

In corporate news, Deutsche Bank remained in focus after its US-listed shares rallied on Friday following reports its settlement with the US Department of Justice over the mis-selling of mortgage-backed securities could be reduced from $14bn to $5.4bn. German-listed shares in the lender were not trading on Monday due to the public holiday, while those traded in the US fell 2.10% to €12.82.

Sticking with banks, Reuters reported that Monte dei Paschi di Siena, Nomura and Deutsche Bank have been ordered to stand trial in Milan over alleged financial crimes.

ING was also in the spotlight after announcing plans to shed 7,000 jobs as it looks to cut costs.

Henderson Group surged after agreeing a $6bn merger with US fund management peer Janus Capital.

Quality assurance provider Intertek edged up after saying it has bought EWA Canada, a cyber security specialist, from Electronic Warfare Associates to take hold of an opportunity in the internet of things market.

AstraZeneca advanced as it global biologics research and development arm MedImmune entered into a licensing agreement with Allergan for the global rights to MEDI2070, which is currently in a Phase IIb clinical trial for moderate-to-severe Crohn's disease and ready for Phase II for ulcerative colitis.

On the data front, Markit’s final eurozone manufacturing purchasing managers’ index came in at 52.6 in September, in line with the flash estimate and up from 51.7 the month before.

The reading marked a three-month high, with growth of output, new orders, new export business and employment all improving.

In terms of countries, Germany and Austria recording the fastest growth. Italy moved back into expansion territory, while France edged closer to stabilisation.

Chris Williamson, chief business economist at IHS Markit said: “The key message from the September survey is that the euro area’s manufacturing economy continues to expand at an encouragingly solid pace. The PMI points to production rising at a steady 2% annual pace in the third quarter, with momentum picking up in September.