LONDON (Reuters) - European shares extended their recovery rally on Monday thanks to bank stocks as dealmaking took centre stage again after a week of political tension in Italy and Spain.
Investors' concerns over rising trade frictions were trumped by very strong U.S. jobs data on Friday. Europe's STOXX 600 (STOXX) took the lead of Asian markets climbing on the data, up 0.6 percent while Germany's DAX (GDAXI) rose 0.8 percent.
News about mergers and acquisitions (M&A), particularly in the financial sector, drove the biggest moves. Dealmaking has been a key trend in equity markets globally this year, with the UK among the most active for deals.
The banks sector (SX7P) jumped 1.2 percent, the strongest boost to overall gains, as investors priced in potential dealmaking activity and stronger economic data.
Unicredit (MI:CRDI) shares rose 3.5 percent and Societe Generale (PA:SOGN) gained 2.6 percent after the Financial Times reported the two were exploring a merger which many investors hope could pave the way to further consolidation in the sector. [nL3N1T50H6]
British lender CYBG (L:CYBGC) gained 3.2 percent after it upped its offer for challenger bank Virgin Money (L:VM) by 7 percent. [nL5N1T60SN]
Outside of financials, Air France (PA:AIRF) topped the STOXX with a 4.8 percent gain after AccorHotels (PA:ACCP) said it was considering to buy a stake in the French airline.
Accor fell 2.5 percent on the news.
Italian and Spanish equities were the top gainers, having suffered a week of heightened uncertainty as Italian parties negotiated a government and Spain's Prime Minister was ousted.