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Europe stocks close higher despite China jitters; HSBC, Volkswagen drop

European stocks closed higher on Monday, boosted by a strong demand for Spanish shares after the country was upgraded by Moody's Investors Service.

Spain's benchmark IBEX index closed provisionally 1.3 percent higher. This followed Moody's upgrade of the country's sovereign debt rating by one notch to Baa2 with a "positive" outlook.

The French Cac ended provisionally 0.7 percent higher and the U.K. FTSE 100 and German DAX ended unofficially 0.3 percent up.

In Italy, the FTSE MIB closed 0.2 percent higher. This came after Matteo Renzi was sworn in as Italy's youngest-ever prime minister on Saturday. He will lead a coalition government, and will present a package of reforms to parliament on Monday.

On the data front, German business moral hit a two-year high on Monday. The Munich-based Ifo think tank said its business climate index increased to 111.3 in February, beating forecasts.

China tightening?

However, downward pressure came from Asia, where Chinese shares fell amid reports that banks had started to tighten loans to property-related industries.

Data from China – the world's second largest economy – showed new home price growth slowed in January for the first time in 14 months. Markets focused on media reports that some banks had started to tighten loans to sectors including property. Reuters however reported that several banks had issued denials.

Stocks listed in Shanghai fell 2 percent with property stocks Poly Real Estate and China Merchants Property tumbling more than 7 percent each. Banking stocks were also in the red, with Bank of China and ICBC falling more than 2 percent.

Europe's basic resources sector – with its heavy exposure to China – was one of the two major laggards on Monday.

(Read more: Asian stocks down; Shanghai skids 2%)

Attention now turns to next week's National People's Congress, an annual meeting of Chinese lawmakers, for possible details on further property-sector curbs.

Symbol
Name
Price
 
Change
%Change
Volume
FTSE
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DAX
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CAC 40
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IBEX 35
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Volkswagen shares down

The other sector laggard on Monday was European automobiles, after German car maker Volkswagen announced plans to buy out minority shareholders of Swedish truck maker Scania.

Scania shares soared 49.9 percent on the news, with analyst upgrades from JPMorgan and Barclays. However, Volkswagen shares closed down around 6.5 percent, as the company also issued a disappointing outlook for 2014.

(Read more: Volkswagen shares plunge on outlook, Scania deal)

Shares of distribution and outsourcing group Bunzl closed around 6.9 percent higher after it reported an 8 percent increase in 2014 net profit.

HSBC shares fell up to 5 percent after the U.K.-listed bank reported pretax profit rose to $22.57 billion, which failed to match analysts' expectations.

(Read more: HSBC shares fall over 5% as profit disappoints)

Ukraine on European course

Oeksander Turchinov has been given the role of acting president in Ukraine, following the ousting of Moscow-backed Viktor Yanukovych over the weekend.

(Read More: Volatile Ukraine may now face default risk)

Turchinov said late on Sunday that Ukraine's new leaders wanted relations with Russia on a "new, equal and good-neighborly footing that recognizes and takes into account Ukraine's European choice," according to Reuters.

(Read More: World Bank: G-20target represents 'paradigm shift')


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