European shares close higher as oil falls

Europe shares regained some ground on Monday, ending in positive territory as speculation on further stimulus from the European Central Bank (ECB) boost sentiment, even as the oil price continued to tank.

Chemicals, pharma higher

The pan-European Euro Stoxx 600 Index reversed earlier losses to close around 0.5 percent higher, with basic resources and oil and gas sectors recovering from lows seen earlier in the day after Goldman Sachs slashed its short-term price forecasts.

The FTSE 100 under-performed to close around 0.1 percent lower. The French CAC rallied over 1 percent led higher by luxury group LVMH and the German DAX traded over 1.4 percent higher.

Brent dropped below $48 a barrel and U.S. crude slipped to trade at around $46 after analysts at Goldman's lowered their three-month price forecast for Brent to $42 per barrel from $80 and cut U.S. crude to $41 from $70 per barrel.

Read MoreShire buys NPS Pharma in $5.2 billion deal

US jobs mixed

Symbol
Name
Price
 
Change
%Change
Volume
FTSE
---
DAX
---
CAC
---

Sentiment was lifted on Monday with speculation that the European Central Bank (ECB) could be ready to announce a quantitative easing (QE) program. A source close to the central bank told CNBC on Monday that the program would be based on the contributions made from national central banks,

The source added that the central bank is planning to design a sovereign debt purchase program based on the paid-in capital contributions made by euro zone central banks.

Read MoreECBplans QE according to paid-in capital: Source

U.S. stocks erased starting gains and turned lower on Monday, as worries about the falling price of oil overrode enthusiasm that came with a bout of corporate deal making.

After the close, Alcoa reports fourth-quarter results, marking the unofficial start to the earnings season. The aluminum producer gained in early New York trading after Nomura Holdings advised purchasing its shares

JPMorgan Chase, Wells Fargo and Citigroup are among the major banks scheduled to report earnings later in the week.

In pharmaceuticals, shares of pharma firm Shire rose 1.6 percent after an announcement that it has agreed to buy U.S. biotech firm NPS ,before ending 0.3 percent higher.

Arkema, a specialty chemicals company ended 2.6 percent higher after Citigroup raised its outlook on the firm to a "buy" from a "neutral".

In other news, France is recovering from last week's terrorist attacks in the capital Paris. Around 3.7 million people, including world leaders and statesmen, joined a mass rally in Paris on Sunday to remember the 17 victims of three separate attacks in Paris last week.

Elsewhere, a team of Indonesian navy divers has retrieved one of the two black boxes from an AirAsia airliner that crashed two weeks ago, killing all 162 people on board, a government official told reporters at a news conference Monday, according to Reuters.

In other stocks news, Jaguar Land Rover said that sales had risen in 2014 with a total 462,678 units sold.

Follow us on Twitter: @CNBCWorld