Europe close: Stocks rally on Japan stimulus hopes

European stocks rallied on Monday on hopes of further monetary easing in Japan following the elections over the weekend.

At the close the Germany's DAX rose 2.12%, France's CAC 40 increased 1.76%, Italy's FTSE MIB gained 1.21% and Spain's IBEX 35 climbed 1.46%.

Japan Prime Minister Shinzo Abe declared victory at Sunday’s elections, sending Asian equities higher. Abe said he would push ahead with Abenomics, his programme of economic reforms.

“European markets have continued where they left off on Friday boosted by speculation of further stimulus from the Bank of Japan after a victory by Japanese Prime Minister Shinzo Abe in Japanese Upper House elections at the weekend, raised expectations that an improved mandate will prompt the Japanese government to finally implement the long awaited third arrow of Abenomics.

In the UK, David Cameron announced he was stepping down on Wednesday, paving the way for Theresa May to become Prime Minister. Cameron had intended to resign as leader of the Conservative Party in September but decided to quit sooner after Andrea Leadsom bowed out of the race. The pound rose 0.32% against the dollar at $1.2996 and increased 0.48% to the euro at €1.1776 as the announcement removed the political uncertainty hanging over the Conservatives.

“We are not going to have a prolonged leadership election campaign,” he said in a statement. “I think Andrea Leadsom made absolutely the right decision to stand aside. It is clear Theresa May has the overwhelming support of the Conservative parliamentary party.”

Elsewhere, a better-than-expected US non-farm payrolls report on Friday continued to give the US market at boost. Many analysts said, however, that the strong jobs report is unlikely to persuade the Federal Reserve to raise interest rates any time soon in the wake of the UK’s Brexit vote and low inflation.

Meanwhile, oil prices fell as data on Friday from industry group Baker Hughes showed the number rigs looking for oil in the US rose by 10 to a total of 351, adding to concerns about the global supply glut.

Brent crude declined 0.49% to $46.53 per barrel and West Texas Intermediate dropped 0.55% to $45.16 per barrel at 1634 BST.

On the company front, ThyssenKrupp gained after the German steelmaker confirmed it was in talks with Tata Steel over sector consolidation.

Shares in Italian bank Monte Paschi advanced following reports that bank rescue fund Atlante will soon take on bad loans from Monte Paschi.

Software provider Cerillion jumped after saying it secured a contract worth an initial £2.1m from a telecommunications company.

LafargeHolcim Ltd. climbed after agreeing to sell an Indian building-materials business to Nirma Ltd. for an enterprise value of about $1.4bn.

Airbus Group SE edged higher on reports that it may win an order for as many as 100 jetliners from AirAsia Bhd.