European shares rose on Monday, marking a slight rebound after two straight weeks of losses, as gains in banking and energy company shares lifted the region's stock markets.
The pan-European STOXX 600 index, which had fallen to a six-week low on Friday, rose 0.7 per cent. The STOXX 600 remains down by 7 per cent so far in 2016.
A rise in the shares of heavyweight banking stocks, which had slumped on Friday following a threatened $14-billion fine on Deutsche Bank from US authorities, added the most points to European stock markets.
However, Deutsche Bank fell another 1.3 per cent, extending losses following an 8.5 per cent slump in the stock on September 16.
Analysts at US bank Citigroup said while battered bank stocks represented a tempting investment opportunity, buying into the sector would nevertheless represent the “world's biggest contrarian trade''.
“History says 'Buy' but our key message is do not 'Underweight' the sector,” said Citi analysts, led by Jonathan Stubbs, in a note to clients.
Firmer oil prices also propped up markets, with the STOXX Europe 600 Oil & Gas index advancing 1.6 per cent.
Oil prices rose on Monday after Venezuela said OPEC and non-OPEC producers were close to reaching an output deal, and as clashes in Libya raised concerns that efforts to restart crude exports could be disrupted.
“Firmer oil prices are helping things a bit,” said Rupert Baker, a European equity sales executive at Mirabaud Securities.
“We're jagging around a bit at the moment on the European markets, with no clear direction. Last week was a poor one for Europe, and I'd still have a slight downwards bias on the markets,” added Baker, citing negative pressures from weak corporate earnings and an anaemic economic backdrop.