- Summers bows out of Fed Chair race
- Syria warned of retaliation if deal fails
- Eurozone inflation cools
- US industrial output rises
FTSE 100: 0.58%
CAC 40: 0.90%
FTSE MIB: 0.86%
IBEX 35: 0.52%
Stoxx 600: 0.58%
The withdrawal of Lawrence Summers from the running for Federal Reserve Chairman and receding fears of a military strike in Syria helped to boost investor sentiment in Europe on Monday.
European equities rallied, with Germany's DAX index hitting an all-time high, supported by news Summers bowed out of the race for the Fed job.
It paves the way for current Fed Vice Chair Janet Yellen to take over from Ben Bernanke.
Yellen is a firm favourite as investors expect she will support a slower reduction of stimulus.
The Fed will announce whether it will begin scaling back of its $85bn per month in bond purchases at its two-day policy meeting which kicks off on Tuesday.
The central bank has said it will begin tapering some time this year so long as it feels the US economy and jobs market has recovered sufficiently.
Barclays Research predicts the Fed may trim its monthly asset purchases by $15bn to $70bn.
The Fed is also expected to leave forward guidance unchanged, based on the view that the US economy will grow at a modest pace of 2% in the second half of 2013 along with a steady improvement in labour-market conditions.
"Economic data in the US so far point to a rather soft start to the third quarter, with our third quarter gross domestic product (GDP) tracking estimate at 1.7%, trailing our official forecast of 2%," Barclays said.
Meanwhile, concerns over a potential military attack on Syria abated after Britain, France and the US warned there will be consequences if the country's government fails to hand over its chemical weapons.
The US and Russia have agreed that President Bashar al-Assad's regime must submit details of its stockpile within a week. The weapons will then be removed and destroyed before mid-2014, under Russia's proposal.
US President Barack Obama has insisted that if diplomacy failed he will push for military force against Assad's government which was accused of using chemical weapons against civilians last month.
"With the prospects of an imminent military conflagration on Syria diminishing into the distance after the weekend agreement between the US and Russia on Syria's chemical weapons, the markets would appear to have one less thing to worry about as markets begin a new week, with all eyes on this week's Federal Reserve meeting, and whether or not we will see the beginning of the long anticipated tapering programme", said Senior Market Analyst Michael Hewson from CMC Markets.
Eurozone inflation eases
Eurozone inflation cooled in August according to data published by Eurostat on Monday, even as the region's central bank head reiterated that low rates continued to be warranted for an extended period.
The annual rise in consumer prices across the single-currency region settled at 1.3% in August, down from 1.6% in July. The annual rate in August 2012 was 2.6%.
European Central Bank (ECB) President Mario Draghi said he is "encouraged" by the fact that inflation expectations remain "firmly anchored" and repeated the monetary authority's promise to keep rates at record lows.
New York index disappoints
The Federal Reserve Bank of New York´s regional manufacturing gauge fell back in August to a reading of 6.29 from 8.24 in the month before. Analysts were expecting a small rise to 9.10.
US industrial production increased by 0.4% from July to August, in line with the consensus forecast. Manufacturing production, meanwhile, rose by 0.7%, ahead of the 0.5% increase expected.
Airlines stocks rise as oil prices
easyJet and International Consolidated Airlines (IAG) soared as the price of oil fell on easing fears over an imminent strike in Syria.
Brent and West Texas Intermediate crude futures dropped by $1.453 per barrel and $1.093, respectively, on the ICE.
Fresenius advanced as the German health-care company was upgraded by MainFirst Bank AG to 'outperform' from 'underperform'.
H&M gained after the clothing retailer said revenue at stores open at least a year increased 4% year-on-year in August.
Petrofac rallied after the oil and gas services provider won a $120m contract to operate and manage two training facilities for Malaysian oil major Petronas.
K+S jumped following news Kogan, a longtime ally of President Vladimir Putin, is seeking to buy out Uralkali's three main shareholders.
The euro edged up 0.43% to the 1.3351 US dollar.