Bouncing Energy Shares Help European Stocks Extend Rally

A rebound in most energy shares drove European equities higher on Monday, while Greece's bourse was also boosted by the country's prime minister offering to bring pro-European independents into the government.

Bucking the trend, shares in Italian lender Banca Monte dei Paschi di Siena shed 7.3 percent, hit by renewed fears of big writedowns on poorly performing loans.

Monte Paschi is expected to book around 3 billion euros in gross loan writedowns in the last quarter, much higher than the 1.2 billion euro total booked over the previous three quarters.

However, the biggest loser on Monday was French semiconductor engineering group Soitec, plummeting 53 percent after warning on its profit outlook.

Britain's blue-chip FTSE 100 index advanced by 0.6 percent, Germany's DAX gained 0.7 percent, France's CAC rose 0.3 percent while the pan-European FTSEurofirst 300 index climbed 0.4 percent.

Athens' ATG equity index, which has fallen by more than 25 percent in 2014 on concerns about a disorderly exit by Greece from its international bailout, rose 0.6 percent.

Greek Prime Minister Antonis Samaras offered on Sunday to bring pro-European independents into the government and hold new elections in late 2015 if lawmakers back him to elect a new president.

Most oil and gas stocks gained ground on Monday, even as Brent crude oil prices remained volatile after their recent slump. Total was up 1 percent, BP up 0.9 percent and Royal Dutch Shell (RYDAF) up 0.6 percent.

"Oil majors are insulated to an extent. They can still be very profitable at this level of oil. We feel some of these companies have very interesting dividend yields, so we have selectively been taking exposure to the oil majors," said Jon Ingram, fund manager at JPMorgan Euroland Dynamic Fund.

"But in the event of the oil price falling or even staying at these levels, a number of oil services companies just don't have businesses, or have businesses that are massively impaired."

Smaller oil services firms remained under pressure on Monday, with Tullow Oil (TUWLF) down 2.2 percent and TGS down 1.2 percent.

The MSCI World energy sector index has tumbled 30 percent since June, wiping out about $1 trillion in the market value of oil and gas shares, roughly the size of the combined annual GDP of Saudi Arabia and Qatar, data from Thomson Reuters Datastream shows.

The slump in crude oil prices, which are down by nearly half in six months, has also been pummelling the bonds of energy companies and sending shockwaves through the high-yield credit market.

Europe bourses in 2014: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up

By Blaise Robinson and Sudip Kar-Gupta, Additional reporting by Alistair Smout in London