European shares rose on Monday, starting the second half on a stronger footing with oil stocks and banks leading a broad-based bounce from lows hit last week on worries over tightening monetary conditions.
The pan-European STOXX 600 index rose 0.7 per cent after ending at two-months lows on Friday, while Britain's FTSE 100 slightly underperformed with a gain of 0.4 per cent.
While no sector in Europe was trading in negative territory, banks, which benefit from expectations of higher rates, led the broad-based rebound with a surge of 1.6 per cent.
JPMorgan said they remained overweight on euro zone banks due to rising government bond yields, but remained bearish on global cyclical plays like autos and capital goods despite recent poor performance.
“The tightening in monetary conditions could pressure valuation multiples near term,” JPMorgan strategist Mislav Matejka said, noting that given the stronger euro, domestic plays should be favoured over export oriented stocks. .
The banking sector index was buoyed by sectors heavyweights, including HSBC, UBS and Santander.
Carige , up 7.6 per cent, led the gainers in Italy on the day its board holds a crucial meeting to discuss capital plans for the troubled regional lender.
The oil & gas index, the worst sectoral performer in Europe so far this year, rose 1.5 per cent as the first fall in US drilling activity in month buoyed oil markets.
Shares in oil majors BP and Total rose 1.3 and 1.7 per cent, respectively. JPMorgan said energy and mining stocks should be supported by a weaker US dollar.
Nets rose 10 per cent to its highest in more than one year after the payment services provider said it was reviewing options after being approached by potential buyers.
Analysts at Nordea said the Danish firm could be an attractive target for “several peers", naming credit card giants Mastercard and Visa as potential bidders.
Provident Financial was the top loser in Europe after Liberum analysts said another profit warning for its Home Credit division was likely.