Europe Markets

US Debt Ceiling Proposal Helps Europe Shares Higher

European shares closed higher on Monday, managing to hold onto earlier gains as investor sentiment was buoyed by an agreement among U.S. Republicans on Friday to extend the debt ceiling for three months.

European markets

The FTSEurofirst 300 Index rose 0.23 percent higher and closed provisionally at 1166.26 points. During Monday's sessions it traded near two-year highs after the closed at a five-year high on Friday. Republicans in the U.S. House of Representatives also said on Friday they will extend the government's borrowing authority for three more months, stepping back from a showdown with the President.

At the weekend, German Chancellor Angela Merkel's conservative coalition lost regional elections in one of the country's most populous states, losing by one seat to the opposition.

The narrow victory for the center-left Social Democrats and Greens in Lower Saxony - one of the country's bellwether states - has revived the opposition's hopes for defeating Angela Merkel in September's national election, though she is still ahead in national polls.

"Angela Merkel's CDU-FDP alliance suffered important setbacks over the week-end, losing control of both Hanover and Lower-Saxony to the SPD-Greens in single-seat victories for the opposition. With the country going to the polls in September, domestic German politics will loom ever larger over the problems Europe faces this year," Rebecca O'Keeffe, head of investment at Interactive Investor said in a morning note.

German producer price index (PPI) data released on Monday, showed producer costs rose 1.5 percent year-on-year in December, less than the 1.7 percent forecast by economists.

Also in Europe, in comments published in Swedish daily Dagens Nyheter, the head of Germany's central bank and a key European Central Bank (ECB) policymaker, Jens Weidmann, said that the ECB's demand for governments to reform their economies as a condition for the ECB buying their debt could compromise the central bank's independence.

Barack Obama was privately sworn in for a second term ahead of a public inauguration ceremony on Sunday evening. All U.S. markets are closed today for the Martin Luther King national holiday.

The International Monetary Fund announced late on Friday that the funding gap for Greece was estimated at 5.5 to 9.5 billions euros. Greece's Athens Composite Index closed slightly higher on Monday after opening lower and shares in the National Bank of Greece showed heavy losses, closing down 6.67 percent lower.

In stocks news, Admiral Group was upgraded by Goldman Sachs to a conviction buy from neutral; shares in the U.K. insurer closed higher by 5.2 percent.

Swiss luxury goods company Richemont gave a cautious outlook in an earnings announcement on Monday. Sales rose 5 percent between October and December to 2.86 billion euros missing forecasts for a 7.6 percent rise. The firm was the biggest decliner on the Euro Stoxx 600 Index, falling 5.59 percent.

Danish drug company Novozymes released a full-year trading statement which beat expectations. The firm also announced Peder Holk Nielsen as its new CEO; shares closed 6.97 percent higher.

U.K.-based educational company Pearson, which owns the Financial Times, released a full-year trading statement for 2012 on Monday. The firm warned of tough market conditions and of changes to the publishing industry; shares fell 2.91 percent.

Reports of activist investor involvement at PostNL was enough to send the shares higher by 6.87 percent. A potential takeover by UPS of TNT Express was blocked last week and shares in PostNL, which has a large stake in the delivery firm, showed heavy losses.

A series of upgrades and price target changes for Air France KLM sent its shares higher 3.99 percent on Monday.