Europe midday: Stocks gain with banks in the lead

European stocks started the week on the front-foot, with a much stronger-than expected reading on the single currency area's manufacturing and services sectors helping to offset a mixed batch of corporate results.

Spain's Ibex 35 was leading the region's indices higher and was up by 1.38% to 9,225.50 as of 1147 BST.

Over the weekend the country's Socialist PSOE party voted to abstain in an upcoming confidence vote in parliament, paving the way for the centre-right PP party to be able to form a minority government, thus avoiding a third round of elections.

In parallel, the pan-European Stoxx 600 was higher by 0.40% to 345.65, alongside gains of 0.82% for Germany's DAX to 10,797.16 and gains of 0.77% for the CAC-40 to 4,570.27.

Banks were in the lead, with the Stoxx 600's gauge of lenders advancing by 1.39% while the euro/dollar was bouncing back by 0.15% to 1.0896.

Markit's preliminary composite output index for the euro-area jumped from a reading of 52.6 in September to 53.7 to reach a 10-month high (consensus: 52.9) amid strength in both the manufacturing and services side of the economy.

Commenting on the flash PMI data, Chris Williamson, chief business economist at IHS Markit said: “The eurozone economy showed renewed signs of life at the start of the fourth quarter, enjoying its strongest expansion so far this year with the promise of more to come. With backlogs of work accumulating at the fastest rate for over five years, business activity growth and hiring look set to accelerate further as we head towards the end of the year."

The October PMI figures were consistent with a rate of growth in euro area gross domestic product of 0.4% quarter-on-quarter and of 0.5% in the case of Germany.

There were also indications of stronger growth ahead in France, Williamson added.

In corporate news, shares in Royal Philips rocketed after the company posted third quarter operating profits of €649m, up from €570m a year ago on a 2% rise in sales to €5.9bn.

The healthcare and lighting products manufacturer also reiterated its full-year forecasts and said it was looking to sell its Lumileds lighting components arm before year-end.

UK-listed aerospace components supplier Cobham crashed lower after the outfit downgraded its full-year outlook for earnings.