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European stocks close slightly higher as oil rally peters out

European stocks ended Monday slightly higher after paring some gains as the rally in oil prices faded.

The pan-European STOXX 600 closed 0.12 percent higher, having earlier climbed to its highest level since late April. However, it pared gains after a joint statement on stabilizing oil prices from Saudi Arabia and Russia fell short of hopes.

The U.K. benchmark FTSE 100 traded 0.1 percent lower, the French CAC and the German DAX were also roughly flat.

U.S. financial markets were closed Monday for the U.S. Labor Day holiday.

European Markets: FTSE, GDAXI, FCHI, IBEX

Oil prices rallied by up to 5 percent in the build up to Saudi Arabia and Russia signing a joint statement on the oil market at the G-20 summit in China. The two nations are going to set up a working group to monitor the oil market and to ensure its stability.

Brent and WTI crude futures pared gains after the statement, which failed to promise the much-touted-but-never-delivered freeze to crude production.

Meanwhile, Markit's final composite Purchasing Managers' Index (PMI) for the euro zone in August was 52.9, below a flash estimate of 53.3 and July's figure of 53.2. August's reading was the lowest since January 2015. But it's still above the 50 mark that divides growth from contraction.

Sterling traded around a seven-week high against the U.S. dollar after the Markit/CIPS PMI for the U.K. services sector jumped to 52.9 in august. This was the biggest one-month gain in the survey's 20-year history, according to Reuters.

Royal Bank of Scotland and Lloyds shares dropped after Deutsche Bank cut its price target for both companies' stock.

Italy's Unicredit fell 0.6 percent after chief executive Jean-Pierre Mustier said he was not worried that a capital-raising for the lender would clash with a planned cash call for Banca Monte dei Paschi di Siena (BMPS).

And shares of BMPS closed lower by around 1.04 percent after La Stampa reported that Italian Prime Minister Matteo Renzi has spoken with Angela Merkel about using the European Stability Mechanism to give funds to the troubled lender if its planned capital-raising doesn't work.

Telefonica announces IPO of mast unit

Elsewhere, Marks and Spencer will cut 500 jobs at its head office this week, according to a Sky News report on Saturday, sending shares in the British retailer 1.4 percent lower.

Spain's Telefonica traded higher after it announced its intention to float for a partial listing of its Telxius masts unit and said that it will decide on a partial sale or initial public offering of its U.K. O2 unit in the next few weeks.

In other news, Angela Merkel has suffered a sobering defeat in regional elections this weekend. The right-wing Alternative for Germany (AfD) party was the second-most popular party in regional elections in Mecklenburg-Western Pomerania, beating the German Chancellor's CDU party for the first time in a state vote. The center-left Social Democrat party (SPD) came first, however.

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