Europe rallies ahead of crucial Brexit vote; Deutsche Bank, Commerzbank rise on merger reports

  • Deutsche Bank and Commerzbank shares surge amid reports that the two have agreed to hold merger talks.
  • An Ethiopian Airlines crash involving the Boeing 737 puts pressure on Norwegian Air and Safran.
  • Britain's prime minister will reportedly fly to Strasbourg in a last-ditch effort to get a deal that satisfies U.K. lawmakers.

European stocks rallied Monday as traders looked ahead to a crucial vote in the U.K. that will determine whether the country's Brexit deal will be approved.

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The pan-European Stoxx 600 index closed provisionally up by 0.76 percent with almost every sector in the black.

Banks were in the spotlight with the sector trading 1.5 percent higher. Commerzbank rose to the top of the benchmark, up over 7 percent. This was as Deutsche Bank reportedly agreed to hold merger talks with its rival after CEO Christian Sewing dropped his opposition to the deal. According to several media reports over the weekend, Sewing was forced to reconsider his stance following investor pressure over the bank's declining performance.

The German Government, which still owns 15 percent of Commerzbank, is understood to be backing a tie-up between the country's two largest lenders. Reuters reported that Berlin is pushing for a deal, even though it could cause a multi-billion euro financial hole, because it would force the re-valuation of the lenders' assets. Deutsche Bank shares were up 4.7 percent.

Elsewhere, shares of Norwegian Air Shuttle were down around 6.4 percent after the company posted weaker-than-expected passenger income and said it would continue to operate Boeing 737 Max 8 jets despite safety concerns. An Ethiopian Airlines crash involving the same model killed all 157 people on board on Sunday, prompting some airlines and Chinese and Indonesian authorities to ground the jets.

Shares of French aerospace firm Safran were also down following the crash. As part of a joint venture with General Electric, Safran produces the engines used in Boeing 737 Max jets. Its shares fell 1.6 percent.

Stocks in the U.S. were also seeing some impact from Sunday's airplane disaster. Boeing shares dropped 6 percent, putting pressure on the Dow Jones Industrial Average. The 30-stock index later pared losses, with a gain in Apple shares giving it a boost at the open.

Brexit

Meanwhile, it's a crucial week for sterling with Brexit at the forefront of investors' minds. U.K. Prime Minister Theresa May is facing a crunch series of votes this week that will determine the course of the U.K.'s exit. On Tuesday, U.K. lawmakers are voting on whether to accept her deal or not.

Brexit is expected to dominate a Eurogroup meeting of euro zone finance ministers on Monday ahead of an Economic and Financial Affairs Council (ECOFIN) meeting of all EU finance ministers Tuesday.

The pound initially came under pressure following speculation from lawmakers that May's deal would face a second rejection in parliament. The British currency later climbed almost half a percent after Irish Foreign Minister Simon Coveney said May would be flown to Strasbourg in a last-ditch attempt to get a deal that will satisfy U.K. parliamentarians.