Stocks in Europe closed sharply higher Monday as investors reacted to news that China will announce a 50 percent cut in car purchase taxes and German Chancellor Angela Merkel plans to step down as party chairman.
The pan-European Stoxx 600 closed 1 percent higher provisionally, with the majority of the sectors trading well above the flatine. Auto stocks pushed higher, up by more than 3 percent. Volkswagen rose 4.5 percent and Daimler jumped 1.7 percent following a report from Bloomberg that China will halve its car purchase tax.
Banks were also among the top performers on the back of strong earnings. HSBC rose 5 percent after reporting a 28 percent increase in pre-tax profit in the third quarter of the year from a year ago. Banco Bpm also rose 5 percent on Monday after S&P Global kept Italy's investment grade though it changed the outlook for negative.
Shares of WPP were once again under pressure, down by 0.6 percent. The stock fell above 10 percent last week after warning that growth in the business is slowing.
Investors kept their focus on politics. In Germany, a local election over the weekend added further pressure on Chancellor Angela Merkel. Her junior coalition partner has given Merkel's party one year to deliver policy results, threatening to end their support otherwise, Reuters reported. In the aftermath of the local vote, Merkel announced that she will not stand for re-election as chair of her Christian Democratic Union (CDU) party.
The U.K.'s finance chief, Philip Hammond, presented new budget plans for the country, in what is supposed to mark the end of years of austerity measures. It will also be the last budget plan before the country leaves the EU next year.