Europe close: Stocks gain despite drag from Defence issues

European shares swung into positive territory on Monday after a soft start, although defence stocks weighed on a report that Germany was pausing any new military assistance for Ukraine in its war against Russia.

A government spokesman in Berlin later said that the country was still standing shoulder to shoulder with Kyiv but that allies would draw in part from profits on frozen Russian central bank assets to finance their support.

The pan-regional Stoxx 600 index was up 0.61% to 514.59. With little in the way of corporate news to drive sentiment, traders have their eyes on speeches by Bank of Japan Governor Kazuo Ueda and Federal Reserve Chairman Jerome Powell later in the week.

"The start of the week kicked off on a positive footing for stock index bulls with mostly further advances being made in low volume and volatility ahead of Wednesday's FOMC minutes and the end of week Jackson Hole symposium," Axel Rudolph, senior technical analyst at IG said.

"The notable exception is the Nikkei 225 which dropped by over a percent on profit taking."

In equity news, trading platform Plus500 lifted full-year results guidance and reported a 13% jump in new customers for the first half of the year.

Defence stocks were down, but well off their session lows, due to the reports around Berlin's defence budget.

Shares in defence stocks including BAE Systems, Hensoldt, Leonardo, Rheinmetall, Saab, and Thales all finished in the red.