Europe close: Banking stocks lift markets higher despite oil price gains

(Sharecast News) - European stocks advanced for the second day on Monday despite oil prices hitting a two-week high, as banking stocks provided a lift while government bond yields eased.

The Stoxx 600 was up 0.7% at 635.65 by the close of play, with solid gains across all major regional indices.

Bond yields were falling across the continent, with 10-year rates in Germany, Italy, Spain and the UK all firmly lower. However, OAT yields edged higher to 4.905%, teetering at levels not seen in over two decades amid ongoing fiscal concerns in France.

European also held on to gains despite a mixed start on Wall Street, with the S&P 500 flat ahead of this week's earnings updates from the likes of JP Morgan, Wells Fargo, Citigroup and Goldman Sachs.

Energy prices firmed on Monday despite US president Donald Trump claiming that Russia and Ukraine had agreed an "energy ceasefire", set to start on Sunday. Trump's unexpected announcement was part of his "deal" to buy Russian diesel - in direct contravention of US sanctions on Moscow - and questioned by analysts who estimate that the country cannot even produce enough for domestic needs.

While Ukrainian president Volodymyr Zelensky claimed the deal was "news to me", Russia continued to hit energy infrastructure in the neighbouring country, just hours after Trump's comments. Front-month Brent crude futures were up 2% at $106.84 a barrel - the highest since 24 September - further lifted by another Houthi attack on a Saudi airport over the weekend.

"Trump's deal with Putin was only ever going to be a modest sticking plaster. More attacks on tankers and an escalating war in Saudi Arabia spells major trouble for economies and markets," said Chris Beauchamp, chief market analyst at IG.

Carmakers were in focus after the news that the EU will limit Chinese imports of hybrid vehicles to just 350,000 a year, more than half the amount that is currently being shipped into the bloc. BMW finished lower, while Volkswagen and Mercedes-Benz rose.

Volkswagen rose even as it reported a 14.3% decline in global vehicle deliveries in the third quarter of 2026, driven by a sharp downturn in China, where sales plunged by 38.5%.

In other news, Vallourec rose after the French steel tube maker won a contract from TotalEnergies for the Absheron gas field in Azerbaijan.

Meanwhile, banking stocks across the region were in demand, including HSBC, Standard Chartered and Lloyds in London, BNP Paribas and Credit Agricole in Paris, and Commerzbank and Deutsche Bank in Frankfurt.