Europe close: Stocks hit five-week high, oil prices surge

The Stoxx 600 index finished up 0.4% at 515.53, its highest close since 29 October, having now gained 2.2% since last Thursday.

Stocks in Milan and Madrid were rising more than 1% each, while London and Frankfurt gained 0.6% and 0.4% respectively, with the latter's DAX hitting a new record high. Stocks in Paris however only edged 0.2% higher, paring gains after rising as much as 1.1% early on.

Speculation that the French government will collapse was weighing heavily on sentiment with prime minister Michel Barnier expected to lose a no-confidence motion over the budget on Wednesday. Concerns sent the spread between French and German bond yields to its highest in nearly 12 years.

In other news, oil prices were rising ahead of an OPEC+ meeting on Thursday, in which the group is expected to extend output cuts until the end of the first quarter, while political instability in South Korea led to a late-afternoon spike.

Brent was up 2.5% at $73.59 a barrel, after South Korea's president Yoon Suk Yeol declared emergency martial law, arguing that it was needed to defend the country from communists in North Korea.

"South Korea's sudden political instability led to an around 2% rise in the oil price due to supply concerns as traders were already buying the black gold ahead of this week's OPEC+ meeting at which continued output cuts are expected to be announced," said IG senior technical analyst Axel Rudolph.

Italian, Spanish banks surge

Heavyweight banking stocks were providing a lift in Italy, such as Intesa Sanpaolo, Unicredit and Banco BPM, while carmaker Stellantis was rebounding after a heavy drop on Monday on the back of the abrupt resignation of its CEO Carlos Tavares.

In Spains, banks were also in demand, including Bankinter, BBVA, Banco dee Sabadell, Unicaja Banco and Banco Santander.

London's SSP Group was a high riser on the Stoxx 600, jumping 10% after the food service company reported a 35% jump in annual profits as good performances in North America and the UK helped to offset a disappointing performance in Continental Europe.

Irish budget airline Ryanair was also on the ascent after reporting an 11% jump in passenger numbers for November, compared with last year.

Heading the other way was French automotive supplier Forvia, dropping 5% after the company announced that CEO Patrick Koller is to step down in March and be succeeded by Martin Fischer from German competitor ZF Group.