Europe Markets

European Stocks Rally as Banks Surge

European stock indexes closed sharply higher across the board Monday, as banking stocks gained following news Northern Rock was to be nationalized. Oil-related firms also jumped as crude prices neared one-month highs.

Trading volume remained light throughout the session, as U.S. markets were closed for President's Day.

Analysts were unconvinced that stocks had shaken off a recent negativity, however, as fears of further banking writedowns lingered in the wake of the credit crisis.

"I'm more inclined to view this as a bounce in a bear market," said Andrew Lynch, a portfolio manager at Schroders, told Reuters.

Banking stocks were the best performers, with Barclays rising 7.6 percent, RBS up 2.9 percent and Commerzbank up 2.5 percent.

The UK government revealed Sunday it is to nationalize stricken lenderNorthern Rock, after abandoning a 5-month search for a private buyer. Chancellor of the Exchequer Alistair Darling said Monday he would still listen to offers.

Darling and the UK Prime Minister Gordon Brown defended their actions at a press conference, as criticism from the opposition Conservative Party and shareholders mounted.

"This is a bank that, had the government not intervened in September, it would have failed, because it had simply run out of money," Darling told a news conference.

Shares in the bank were temporarily suspended by the UK financial watchdog following the nationalization news.

Dutch courier TNT missed analysts' expectations on its fourth-quarter numbers with a 28.7 percent drop in operating profit. But the company said it is yet to see any evidence of the U.S. economic slowdown on its business.

Germany's Merckalso reported a drop in profit. The pharmaceutical company's shares fell 1.3 percent after it reported a 21 percent fall in quarterly operating profit due to a writedown and integration expenses for its Serono acquisition, according to Reuters. It did, however, announce plans of a higher dividend payout for 2007.

Also in Germany, tax regulators prepared to launch up to 150 investigations centered on the Liechtenstein-based bank accounts of wealthy German nationals.

And in Switzerland, Qatar has bought shares ofCredit Suisse, according to a published report, sending shares of the bank up 3.2 percent.