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VW, RSA hammered as Europe ends higher

European equities bounced back Monday, finishing higher despite an uninspiring lead from Asia and key European stocks being crushed throughout the day's session.

The pan-European Stoxx 600 index closed up 1.1 percent higher, shrugging off last week, after the Federal Reserve kept interest rates on hold.

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IBEX 35
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London's FTSE 100 index ended 0.1 percent higher on Monday, while its European counterpart, the French CAC jumped up 1.1 percent.

Despite earlier volatility, Germany's DAX edged up in late trade, closing 0.3 percent higher, shaking off woes over Volkswagen and fears of the index hitting bear market territory.

Global markets are still reeling from the Fed's decision last Thursday not to raise interest rates. The decision prompted fresh concerns about global growth. U.S. stocks traded higher Monday as Wall Street tried to shake off last week's rate hike decision amid comments from several Federal Reserve speakers.

RSA shares tank; Autos lose speed

In individual stocks news, shares of British insurer RSA sank 20.8 percent by the close, after Zurich Insurance said it was ditching its takeover bid for the company. Zurich shares wobbled throughout the session, closing down 2.8 percent.

Meanwhile, shares of German-listed carmaker Volkswagen (VW) were off over 18.6 percent after news that the company could be fined up to 18 billion euros ($20.3 billion) by U.S. authorities. They allege the company's software for some diesel models misled buyers about emissions. The company's Chief Executive, Martin Winterkorn, issued an apology on Sunday and called for an external investigation.

Consequently, other stocks in the auto sector were crushed by the news, with shares in Porsche (owned by VW) sinking 17.2 percent, France's Renault down 3.2 percent, and Daimler pared losses throughout trade, closing down 1.4 percent.

Dialog Semiconductor also saw its shares slump 18.9 percent after the microchips maker agreed to buy U.S. peer, Atmel for $4.6 billion.

In the green, oil prices were posting gains, after data revealed U.S. drilling had slowed. Brent crude was trading up at $48.36 per barrel, while U.S. light crude was at $46.09. This gave oil stocks a boost, with SBM Offshore, Neste and Royal Dutch Shell all finishing in positive territory.

Greece chooses a leader

Aside from the Fed, Greece is back on the menu for discussion. Alexis Tsipras is once again Greek prime minister after a decisive victory in a snap election in Greece on Sunday. He will return to power in a coalition government with the right-wing Independent Greeks.

Speaking to cheering crowds in a central Athens square, Tspiras promised a period of stability and said he "felt vindicated" after quitting in August to start on a clean slate with voters, Reuters reported. There are hopes his clear win will pave the way for reforms that are a pre-requisite of the country's third 85 billion euro ($96.2 billion) bailout.

The Athens stock exchange ended the day 0.6 percent lower.