Europe close: Stocks end session higher ahead of central bank meetings

The benchmark Stoxx Europe 600 index finished higher by 0.71% at 344.66, France’s CAC 40 was 0.31% firmer and Germany’s DAX gained 1.62%. Milan's FSTE Mibtel was the outlier, drifting down by 0.03% to 18,981.77.

At the same time, oil prices were in the red. West Texas Intermediate was down 3.55% at $37.18 a barrel while Brent crude was 2.07% lower at $39.59.

“European equities are continuing on from where they left off last week, trending higher at the start of a critical week for markets, with central banks yet again taking centre stage,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor.

“Investors will be hoping the Bank of Japan will continue supporting the market and that the Federal Reserve will at least refrain from making any decisions that might jeopardise sentiment. Amid conflicting views among FOMC members as to the strength of the US economy and the outlook for inflation, the prospect of further divergence in policy from Janet Yellen relative to other global central banks could potentially undermine the current stock market rally.”

Although Monday looks set to be a fairly quiet session, the rest of the week will be busier, with rate decisions from the Bank of Japan, the Federal Reserve and the Bank of England due on Tuesday, Wednesday and Thursday, respectively.

Basic resources put in a solid performance, with the Stoxx 600 up 1.67% to hit 271.33 points despite mixed Chinese data; analysts attributed weakness in the latest industrial production and retail sales figures out over the weekend to seasonal and statistical effects.

Industrial production and retail sales figures were both soft, but 2016 fixed-asset growth beat market expectations while data showed investment in China's property sector improved.

Corporate news was thin on the ground on Monday.

Banca Monte dei Paschi di Siena surged after newspaper La Repubblica said Prime Minister Matteo Renzi had asked Italian state lender Cassa Depositi e Prestiti and Intesa Sanpaolo to consider a potential acquisition of the bank.

London-listed energy group SSE edged higher after announcing the sales of its 49.9% stake in Clyde wind farm for £355m.

On the downside, French defence and security firm Safran slumped after confirming it was selling its Morpho Detection business and saying it was reviewing strategic options for its identity and security activities.

Admiral Group was under pressure following downgrades by HSBC and Bank of America Merrill Lynch.

Data released by Eurostat earlier showed a surge in Eurozone industrial production in January.

Production rose 2.1% in January from December, beating expectations of a 1.7% increase. On the year, production was up 2.8% versus economists’ expectations of 1.6%.

Still, Capital Economics expressed doubt that the sharp rise in January was the beginning of a prolonged upturn.

“The boost to domestic demand from falling energy prices probably has little further to run – we expect oil prices to rise this year. And the impact of the euro’s previous falls on external demand appears to have faded. Indeed, the industrial surveys have weakened this year and the manufacturing PMI is now at a level consistent with annual industrial growth of around just 1%.

“While Eurozone industry got off to a strong start to the year, this is not enough to change our view that overall economic growth will slow from 1.5% last year to about 1.2% this year.”