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European Stocks Close Firmly Higher on Fed-Cut Hopes

Major European markets ended in positive territory Monday, as anticipation of lower U.S. interest rates helped sentiment.

There was also relief in the financial sector that another major bank wouldn't be blindsiding the market with huge writedowns, while energy stocks looked attractive with oil prices at new all-time highs.

Asian markets closed higher as well, with investors betting that the Federal Reserve will lower rates on Wednesday. The market is pricing in a 92% chance of a quarter-point cut, based on federal funds futures contracts traded on the Chicago Board of Trade.

London's FTSE-100 , the Paris CAC-40 and the Frankfurt DAX all ended in the green.

Money moved to energy as New York light crude futureshit a new record, topping $93 per barrel. The Dow Jones Euro STOXX energy index rose more than 1%.

Energy stocks were strong as New York light crude remained at elevated levels. The Dow Jones Euro STOXX energy index rose more than 1%.

UBS' Unexpected Declaration

UBS took the rare step of confirming quarterly guidance just a day before it officially reports earnings. As announced in the beginning of the month, UBS said it would lose up to 800 million Swiss francs ($688 million) in the third quarter and that further fixed-income writedowns were possible.

But after Merrill Lynch's surprisingly large losses last week, no more bad news is good news for banks and the stock rose 0.8%, outperforming the benchmark SMI, which was up 0.5 percent.

The decision by UBS to issue a surprise statement in response to an article in Swiss newspaper Sonntag speculating on a larger-than-expected loss is an indication of how jittery the financial sector has become, CNBC Europe's Dan Scott reported.

UBS is a bank "which never, never, ever comments on any press reports" and "today they've "decided to comment on a report from a paper that nobody ever reads," Scott said.

"I think people are really on edge," he added.

However, analysts said that more bad news may come out of European banks towards the end of the year.

"Europe has been quiet because Europe doesn't have to do quarterly reports," Peter Hahn, from Cass Business School, told "European Closing Bell."