Europe Stocks Close Higher Ahead of Fed Meeting

European shares closed higher on Monday, as investors looked ahead to the U.S. Federal Reserve meeting later this week. The pan-European FTSEurofirst 300 index closed unofficially 0.8 percent higher at 1,184.80 points, following gains to Asian and U.S. markets.

The two-day Fed meeting, ending on Wednesday with a press briefing and economic forecast from Chairman Ben Bernanke, will be the main focus for global markets this week. Investors are eager to know when the Fed may start scaling back its $85 billion monthly bond purchases, with past weeks' data inconclusive as to the extent of economic recovery.

"While policy is obviously widely expected to be left unchanged at this meeting, all eyes will turn to the post-meeting press conference where Bernanke will unveil the Fed's latest economic projections — relevant for the timing of the first rate hike — and hopefully provide greater clarity on the likely timeframe for tapering asset purchases," said Daiwa Capital Markets's Chris Scicluna in a research note on Monday.

Upbeat economic data from the U.S. also boosted shares in Europe on Monday. The New York Federal Reserve's "Empire State" manufacturing came in at 7.84 in June , exceeding expectations for a reading of zero. In addition, U.S. homebuilder sentiment jumped, with the NAHB/Wells Fargo Housing index rising above 50 for the first time since April 2006.

Meanwhile, G-8 leaders gathered in Northern Ireland for a two-day annual summit. Topics for discussion include a global deal to tackle tax evasion and currency weakness.

(Read More: Obama Faces Tough Sell on Europe Austerity at G8)


Telecoms Outperform on M&A Speculation

The European telecommunications index closed 1.6 higher on Monday after speculation that AT&T was interested in purchasing Spain's Telefonica, which Telefonica denied.

(Read More: Telefonica Denies Offer From AT&T)

Telefonica closed around 2.3 percent higher. U.K. telecoms giant Vodafone, which has also been subject to M&A rumors, ended around 1.6 percent higher.

But the oil and gas index underperformed the market, dragged down by a 29 percent plummet in Saipem shares. The Italian company issued its second profit warning in less than 6 months on Friday, leading both Morgan Stanley and Socieite Generale to slash their share price targets.