European stocks inched higher on Monday as gains in technology shares and upbeat earnings reports helped investors look past the possibility of extended lockdowns in many countries grappling with new variants of the novel coronavirus.
The pan-European STOXX 600 index rose 0.2%. Tech stocks were up 1.2% and gained the most among sectors, with their US peers trading near all-time highs.
European technology investor Prosus jumped 6% to an all-time high, while chipmakers climbed amid signs of a global chip shortage.
Dutch health technology company Philips gained 2.5% after reporting a 7% increase in fourth-quarter core profit as the pandemic continued to spur demand for hospital equipment to treat COVID-19 patients.
Wind turbine maker Siemens Gamesa gained 2.6% after it reiterated its sales and profit margin targets, while peer Siemens Energy rose 1.6% after it swung to a core profit in its fiscal first quarter.
"Earnings will be a very important driver: failure to meet expectations is likely to weigh negatively on equities," analysts at Unicredit wrote in a note.
"Indications that the UK variant of the virus is not only more infectious but also more dangerous are likely to be negative for sentiment."
UK equities came under pressure after the health minister said on Sunday 77 cases of the South African variant of COVID-19 were detected in Britain, while French stocks headed lower amid talks of a third lockdown.
British Airways-owner IAG, Ryanair, Lufthansa and Air France KLM fell between 3.9% and 6.9%, while retailers fell 0.4%.
US President Joe Biden is set to reimpose an entry ban on nearly all non-US travellers who have been in Brazil, the United Kingdom, Ireland and 26 countries in Europe that allow travel across open borders.
Meanwhile, a survey showed German business morale fell more than expected in January as a second wave of COVID-19 has brought to a halt a recovery in Europe's largest economy.
The STOXX 600 ended last week almost flat after data showed Europe's dominant service sectors took a hard hit from renewed lockdowns in January.
Among other stocks, Siltronic slipped 2.6% even as Taiwan's GlobalWafers again raised its offer for the German silicon wafer maker by 150 million euros ($183 million) as it tries to win over the target company's shareholders.
French state-controlled power group EDF slumped 11.9% to the bottom of STOXX 600.