With markets in Ireland and the UK closed because of public holidays, yesterday's focus was on continental Europe as markets digested the election of a new French president and the success of anti-bailout parties in Greek polls.
But European stocks rose the most in more than a week as German Chancellor Angela Merkel said she would receive French president-elect Francois Hollande with "open arms" as they work together to tackle the debt crisis.
National benchmark indices rose in 10 of the 16 western European markets open yesterday. Spain's IBEX 35 jumped 2.7pc and Italy's FTSE MIB rallied 2.6pc. Germany's DAX added 0.1pc and France's CAC 40 rose 1.7pc, while Greece's ASE plunged 6.7pc.
The Stoxx Europe 600 Index rose 0.7pc to 254.83, erasing an earlier decline of as much as 0.8pc as a report showed German factory orders topped forecasts. Yesterday's gain was the biggest since April 27 and takes this year's advance to 4.2pc.
"Since last week it has been obvious to most people that Hollande would defeat Sarkozy, but what we need to see is how he'll work together with Merkel and what that will mean for the eurozone," Alexander Kraemer, a Commerzbank strategist, said.
"The question will be how any new growth initiatives will be implemented. Will it be spurred by new government spending, being the absolute opposite of austerity measures, or will it be achieved through liberating the labour market?"
BNP Paribas and Societe Generale, the biggest French lenders, gained 4.3pc to €30.25 and 4.4pc to €18.06, respectively, erasing earlier losses.
The spread between German 10-year government bond yields and French yields on similar-maturity debt narrowed.
UniCredit and Intesa Sanpaolo rose 3.8pc to €2.80 and 2.5pc to €1.08, respectively, as UBS kept its positive view of the lenders among Italian banks.
Banco Santander, Spain's biggest lender, rallied 4.3pc to €4.88. Banco Bilbao Vizcaya Argentaria advanced 4.4pc to €5.25.
Air France-KLM rallied 6.9pc to €3.72, the highest in almost three weeks.
National Bank of Greece plummeted 8.3pc to €1.55 while Alpha Bank dropped 19pc to 84 cent. Public Power Corporation, Greece's biggest electricity company, retreated 14pc to €2.14.
Roche Holding fell the most since November after abandoning development of an experimental cholesterol drug.
The biggest maker of cancer drugs dropped 3.5pc to 159.40 Swiss francs after an independent group of experts recommended stopping the study of the drug dalcetrapib "due to a lack of clinically meaningful efficacy". (Bloomberg)