European banking stocks and Italian shares jumped on Monday after Italy's new economy minister promised to keep the country in the euro, dissipating investors' fears of a euro zone break-up and boosting sentiment after a fraught G7 summit.
Euro zone banks rose 3 percent, helping the pan-European STOXX 600 gain 0.8 percent while Italy's FTSE MIB jumped 3.4 percent and Spain's IBEX 1.6 percent. Italian bank stocks climbed 5.9 percent, their biggest one-day gain in more than 13 months, as bond yields fell, with relieved investors buying back into Italian assets after Economy Minister Giovanni Tria vowed on Sunday to stay in the euro and cut debt levels.
Traders said Tria's comments sparked short covering, exacerbating the move.
Italian banks Unicredit and Intesa Sanpaolo led the European index, both up more than 6 percent. Italgas and Poste Italiane, which had been weighed down by political uncertainty, also made strong gains. Swiss voters' rejection of a campaign to radically alter the banking system also helped boost sentiment. Switzerland's stock index was up 1.3 percent with banks Credit Suisse and UBS leading gains.
Swiss consumer goods heavyweight Nestle rose 1 percent.
Optimism over European politics helped investors shrug off a fractious G7 summit marked by stark divisions between the United States and allies over trade. US President Trump backed out of a joint G7 communique and fired off a volley of angry tweets after the summit.
"Ostensibly this should not be good for risk, though markets appear deaf at present to such rumblings," said Neil Wilson, chief market analyst for Markets.com.
The only sign of concern around trade was in the autos sector which was the worst performing, down 0.5 percent.
"Countries need to wake up to the fact that Trump is going to deliver on trade," said a trader at a German bank. "He will tax German autos."
Politics aside, merger and acquisition news drove the biggest moves in individual stocks.
Top of the STOXX 600 was Inmarsat, surging 12.7 percent to a five-month high after rejecting a takeover offer from US firm Echostar.
Bid speculation over the British satellite company had driven the shares up on Friday but the company's confirmation came only after the market had closed.
"Echostar's approach puts Inmarsat clearly into play," said RBC analysts, pointing to SES, Eutelsat, ViaSat, mobile operators and private equity as potential counter-bidders for the company.
Ocado shares rose 11.1
percent after Bernstein analysts gave the British online grocer a double upgrade to "outperform" and Goldman Sachs analysts upgraded it to a "buy".
The stock is already up more than 150 percent this year, boosted most recently by a distribution deal with US supermarket Kroger.
"Ocado's announced partnership with Kroger was transformational in our opinion," wrote GS analysts. "Though the stock price moved materially to reflect this, our analysis at a local market level points to a US opportunity more than double Kroger's initial commitment."