Europe close: Stocks edge cautiously higher, helped by electoral results in Germany

Investors breathed a sigh of relief at the start of the week, after Germany's far-right Alternative for Deutschland failed to steal the show at regional elections over the weekend.

Thanks to a higher voter turnout - albeit after what some analysts described as a "polarising" debate around the AfD - in Saturday's elections in the east German states of Brandenburg and Saxony, Chancellor Angela Merkel's coalition partners, the SPD and CDU, were able to retain the top spot in voting results.

"On balance, this may slightly reduce the risk that the SPD could walk out of Angela Merkel's CDU/CSU-SPD coalition in Berlin within the next six months and bring down the chancellor in the process," said Holger Schmieding and Florian Hesse at Berenberg.

"We currently see a 25% risk that this may happen."

By the end of trading, the benchmark Stoxx 600 had edged up by 0.32% to 380.69, alongside an advance of 0.12% to 11,953.78 for the German Dax while the FTSE Mibtel climbing 0.61% to 21,451.98.

Also helping to boost sentiment was a better than expected reading on Chinese manufacturing sector conditions. Contrary to economists' forecasts, Caixin's factory sector Purchasing Managers' Index improved from a reading of 49.9 for July to 50.4 in August.

However, Sterling felling by 0.83% to 1.20653 against the US dollar amid speculation that fresh general elections might be called in the UK, perhaps even as soon as in the next few days.

And on Sunday,new 15.0% US tariffs on another $112.0bn-worth of Chinese exports kicked-in, as did Chinese levies on US exports, underlining the ongoing trade tensions in the background.

And in Italy, on Friday evening, Five Star party leader, Luigi di Maio, surprised political observers by laying down what appeared to be an ultimatum to his new coalition allies, the Socialist PD party, saying that if his programme was not the basis of the coalition's own then new elections would be better.

Against that backdrop, investors were waiting on the results of a grass roots vote by Five Star members on whether to proceed and form a coalition government with the PD.

In Spain on the other hand, the latest reports appeared to suggest that the main political parties still preferred to avoid new elections, echoing the results of various polls.

There was little in terms of fresh economic data on Monday, although IHS Markit confirmed that euro area manufacturing activity was at its softest since early 2013 with its euro area PMI printing at 47.0, which was unchanged from a preliminary reading.

To take note of, German manufacturing firms' confidence in the outlook hit a 10-year low, IHS Markit said, presumably due in no mean part due to the US-China trade war and Brexit.

On the corporate side of things, Germany's TLG Inmobilien announced that it had acquired a 10.0% stake in Aroundtown and begun negotiations to build one of Europe's largest property companies.

Further north, EQT Partners, Scandinavia's largest buyout firm, announced its intention to float on Stockholm's bourse in what could turn out to be the largest listing of 2019, valuing the firm at roughly €4.0bn.

Finally, AstraZeneca also traded higher after the pharmaceutical giant reported positive trial results for two separate cardiovascular drugs on Monday, leading analysts at Deutsche Bank to mark up their target price for its shares.