Europe Close: Stocks end higher on Greek deal progress

European equity markets ended higher on Monday as signs that Greece was making good progress on its bailout deal, hopes of further monetary stimulus in China and dovish comments by Federal Reserve member Stanley Fischer all helped to underpin the positive mood.

The benchmark Stoxx Europe 600 index was up 0.62%, France’s CAC 40 ended 0.79% higher and Germany’s DAX rose 1.04%.

Chinese data released over the weekend showed exports dropped 8.3% from a year ago, while imports fell 8.1%. Meanwhile, inflation rose 1.6% in July, which is well below the government’s annual target of 3% and producer prices hit their lowest level since 2009.

However, the downbeat data had a positive impact on Chinese shares, raising expectations that Beijing will be forced to introduce further monetary stimulus and pushing the Shanghai Composite up nearly 5%.

“Disappointing Chinese export figures over the weekend have increased the likelihood of more government and central bank stimulus substantially leading to renewed optimism that the worst will soon be behind the world second largest economy,” said Markus Huber, senior analyst at Peregrine & Black.

In Europe, Greece was back in focus as it emerged that weekend negotiations over its third bailout progressed well. A Greek official said the country was hoping to conclude talks with its international creditors by early Tuesday. The news helped to push Greece’s Athex Composite up 2.06%.

Comments from Federal Reserve Vice Chairman Stanley Fischer added to the positive tone. Speaking on Bloomberg TV, Fischer appeared to signal that the central bank may not lift interest rates until inflation returns to normal levels. Fischer said that while full employment is nearly within reach, low inflation means it’s not quite time for the Fed to hike rates.

"The concern about this situation is not to move before we see inflation as well as employment returning to more normal levels," he said.

On the corporate front, London-listed engineering group Meggitt was on the front foot after saying it has agreed to acquire the advanced composites business of Cobham for $200m in cash finance from existing resources, in a deal that is expected to be immediately earnings-enhancing.

Outdoor advertising group JCDecaux rose by 2.96% after its co-chief executive Jean-Francois Decaux told the Financial Times the company could double its market share in the next 10 years.

Vedanta Resources surged after the miner said it was likely to resume operations at its iron ore operations in Goa on Monday after receiving the necessary approvals. The stock closed up 9.67% to 489.91p.

On the downside, Air France-KLM slipped into the red, down 0.37%, despite reporting a 2.4% rise in its passenger numbers for July.

Independent Oil & Gas lost almost half its share price, slipping to 5.9p at market close, after the company said a unnamed backer decided to pull out of a financing deal due to falling commodity prices.