European shares track Asia to gain on rebound optimism

European shares crept higher on Monday, tracking gains in Asia that were fuelled by optimism over a rebound in China's economy, while trade-sensitive stocks rose after a report that the EU's trade chief had called on Washington to drop some tariffs.

The pan-European STOXX 600 was up 0.3pc, with insurance and auto stocks among the biggest gainers.

The telecoms index surged to a three-week high, powered by a 7.3pc jump for Dutch telecommunications company KPN following a report that Sweden-based private equity firm EQT was considering a takeover.

Banking stocks were again in demand after leading the benchmark index to its second straight weekly gain on Friday on bets of more US fiscal stimulus and growing expectations of a Democratic victory in the US presidential election. "Investors have not lost faith that further stimulus measures will follow and that an effective COVID-19 vaccine will soon be placed on the market," said Milan Cutkovic, market analyst at Axi.

But a surge in COVID-19 cases across the continent has raised the spectre of fresh lockdowns and cast a shadow over a nascent economic rebound.

With Italy preparing for nationwide curbs, the European Central Bank's chief economist, Philip Lane, said the euro zone economy was entering a tougher phase. UK Prime Minister Boris Johnson is also expected to set out new measures.

London's FTSE 100 was flat, while the Italian bourse added 0.1pc.

"Investors are walking on thin ice," Cutkovic said. "Further lockdowns would jeopardise the already fragile economic recovery and have lasting effects on consumer confidence."

Data on inflation, industrial production and business conditions is due later in the week. All eyes will also be on a European Union summit on Oct. 15-16, particularly with a UK-imposed deadline for a post-Brexit trade deal.

"It seems progress has been made and if this continues, I would expect talks to continue beyond that self-imposed UK deadline," said Deutsche Bank strategist Jim Reid.

As the third-quarter corporate earnings season gets under way, analysts expect earnings at STOXX 600 firms to have declined 38pc year-on-year in the quarter following a 50.8pc slump in the prior quarter, according to Refinitiv data.

Shares of Airbus SE edged higher as a report said the EU's new trade chief told the United States to withdraw tariffs on more than $7 billion of EU products or face additional duties on exports to Europe.