European Stocks Rise for 5th Straight Day

European stocks extended their winning streak to five days Monday as advances in defensive utility, drug and food shares offset big losses in Volkswagen and Vodafone.

The pan-European FTSEurofirst 300 index of top European shares rose 0.5 percent to close at 933.72. The index lost 12.7 percent in October, its worst monthly performance in six years, and has fallen nearly 40 percent since the start of the year.

Defensive stocks blazed the trail, with utility E.ON making the biggest contribution to the FTSEurofirst benchmark with a 7.1 percent rise, benefiting from a reweighting of Germany's DAX index.

French rival EDF gained 3.6 percent, while foods group Nestle rose 2 percent.

Other defensive gainers included GlaxoSmithKline, up 4.4 percent, and Novartis, which rose 2.7 percent.

The slight recovery in equities was a welcome reprieve but analysts cautioned that the market would be dominated by political and economic news coming later in the week.

"Nothing new has turned up that's frightening," said John Haynes, strategist at Rensburg Sheppard Investment Management. "Things have looked like repairing, though investors will wait for the results of the U.S. elections and the rate moves later in the week," he said.

The U.S. presidential election is set for Tuesday (see complete coverage at CNBC.com), and then investor focus shifts to rate decisions from the European Central Bank and the Bank of England, both expected to be for cuts of half a percentage point, on Thursday.

German auto maker Volkswagen fell 23 percent after exchange operator Deutsche Boerse cut its weighting in the DAX.

And British mobile telecoms group Vodafone, a stock with a big weight on the pan-European index, fell 2.2 percent after a source familiar with the situation said the company was calling analysts to collate forecasts. Traders had cited a rumor it was guiding analysts to expect a lower result.

Royal Bank of Scotland fell 3.4 percent and Barclays lost 4.1 percent, the latter falling amid continued worries over the cost of its equity injection from Middle East investors. HBOS gained 6 percent on weekend media reports of a bid for the company which would rival Lloyds TSB's offer.

Across Europe, Britain's FT-SE 100-share index rose 1.5 percent, while Germany's Xetra-Dax index gained 0.8 percent and France's CAC-40 index advanced 1.2 percent.

In the U.S., Democrat Barack Obama and Republican John McCain took their final shots at each other, barnstorming battleground states on this final day of campaigning before the U.S. presidential election. Obama is leading but McCain hopes to pull off an historic upset.

Really, all that financial markets want is a little clarity.

"Equity markets would like to see a decisive mandate for one or the other candidate to govern," Haynes said. "Investors are frightened of getting caught in a shouting match at a time when certain measures need to be taken."

Societe Generale said in a note last month that it expected European commercial banking, construction, healthcare equipment and insurance to benefit from an Obama win, while aerospace and defense, pharma, investment banking and asset management, luxury goods, oil, chemicals and nuclear energy could gain from a McCain win.

Underlining concerns that an economic downturn may be deep, U.S. manufacturing slumped to a 26-year low in September. The Institute of Supply Management said that its index of national factory activity fell to 38.9 in October from 43.5 in September.

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