European stocks rose on Monday, led higher by Deutsche Telekom on talk of a merger involving its US mobile unit, while the dollar dipped as uncertainty over European politics and the timing of a US interest rate rise kept investors nervous.

US markets were closed for the Presidents Day holiday and this was expected to limit activity.

Unilever shares fell nearly 9 per cent at one point and were on track for their biggest one-day drop in more than 13 years after US food company Kraft Heinz Co withdrew on Sunday a proposal for a merger with its larger rival.

Kraft felt it was too difficult to negotiate a deal after its bid was disclosed so soon after its approach to Unilever, according to people familiar with the matter.

However, the slide in Unilever shares could not prevent the pan-European STOXX 600 index from rising 0.2 per cent to within a point of a 14-month high touched last week.

Monday's rise was led by a 3.3 per cent gain in Deutsche Telekom after a Reuters report that SoftBank is prepared to give up control of Sprint to Deutsche Telekom's T-Mobile US to clinch a merger of the two US wireless carriers.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2 per cent and back towards a 19-month peak reached last week.

Japan's Nikkei rose 0.1 per cent while China's blue-chip CSI 300 index closed up 1.5 per cent, its biggest gain in six months, after media reports on Friday that pension money may begin flowing into the market as soon as this week.

The dollar dipped 0.2 per cent against a basket of major currencies after U.S. bond yields fell on Friday.

The euro rose 0.1 per cent to $1.0620 while sterling rose 0.4 percent to $1.2448. The yen, however, fell 0.2 per cent to 113.07 per dollar.

Politics

The index hit its highest for more than a month last week after US Federal Reserve Chair Janet Yellen said it would be unwise to delay raising interest rates before pulling back on uncertainty over President Donald Trump's policies, particularly on trade.

Minutes of the Fed's latest policy meeting on Wednesday will be parsed foe any clues to the timing of the next hike and Fed officials speak at five events this week.

Cleveland Fed President Loreta Mester said in Singapore on Monday she would be comfortable raising rates if the economy maintained its current performance.

The focus in euro zone debt markets was on politics. French 10-year government bond yields held broadly steady but below Friday's highs. They had risen on concern that possible cooperation between Socialist Benoit Hamon and hard-left candidate Jean-Luc Melenchon could help anti-euro far-right candidate Marine Len Pen in the April/May presidential election.

However, there were no signs of a pact over the weekend.

“It looks superficially that Hamon and Melenchon were not looking to tie up and that reduces market pricing of a Le Pen victory,” said Mizuho rates strategist Peter Chatwell. “But there's still a decent probability the two candidates are forced together.”

Among commodities, oil prices rose, although an increase in the number of US drilling rigs dragged on price. Brent crude rose 35 cents a barrel to $56.16.

Copper rose on supply worries after the world's second-biggest copper mine said it could not deliver promised shipments due to export permit problems. Three-month copper on the London Metal Exchange was last up 0.8 per cent at $6,005 a tonne.

Gold edged up 0.1 per cent to $1,235 an ounce.

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