European shares closed at a new seven-year high on Monday, boosted by a deal late on Friday to extend Greece's financial rescue package. Britain's FTSE 100 index was the only major index to close lower, albeit only slightly, after HSBC reported a 17 percent drop in annual profit. The bank's shares fell 4.6 percent and weighed on peer Standard Chartered.
Investors in continental Europe were encouraged after Greece sealed a deal with euro zone partners to avoid a banking collapse by accepting a conditional extension of its bailout programme and agreeing to present a reform plan. The pan-European FTSEurofirst 300 index ended 0.7 percent higher at 1,535.08 points, its highest level since early 2008.
"We have cleared the first hurdle but Greece has to come up with a serious set of measures now," Peter Dixon, equity strategist at Commerzbank, said. "Over the course of the next few months, we will be having more discussions and possibly a lot more market volatility." Germany's DAX index set a new record high but trimmed gains after the German Ifo business climate index came in below market expectations, even though it set a seven-month high.
The DAX closed up 0.7 percent. It has gained 13 percent since the start of 2015 and currently trades in overbought territory on a number of momentum indicators such as Bollinger bands and stochastic indexes. "The Ifo index was a little bit weaker than expected but we only saw a small reaction," Christian Henke, an analyst at IG, said. "The sentiment is bullish but the DAX is slightly overbought so a small consolidation is possible." Dutch mail group PostNL was the top gainer in Europe, surging 11.4 percent after reporting better-than-expected fourth-quarter profits.
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