European shares touched a four-week high on Monday as strong euro zone industrial output rekindled optimism over the region's economic outlook, while AXA rose on talks of a UK asset sale to Resolution. By 1038 GMT, the pan-European FTSEurofirst 300 index of top shares was 1 percent higher at 1,018.48 points, up for the fourth consecutive session.
The index is still down 7.5 percent since mid-April, when fears that Greece's debt crisis could spread to other euro zone countries and undermine global economic recovery intensified.
"Shares got a little bit cheap (following recent falls) and it was all a bit oversold," said David Buik, senior partner at BGC partners.
"Second quarter earnings will be somewhat better than people expect and there may be just a little bit of mileage left in the current rally."
Banks were among the biggest gainers, rebounding from falls in recent weeks on easing worries over the euro zone debt crisis.
Barclays, HSBC, Societe Generale, BNP Paribas and Deutsche Bank rose 0.9 to 2.6 percent.
The VDAX-NEW volatility index, Europe's main barometer of investor anxiety, fell 4.1 percent to its lowest level in one month, highlighting investors' appetite for risk.
Comments from Greece's prime minister late on Friday also helped soothe worries over Europe's debt crisis.
George Papandreou told a meeting of top bankers his government made a conscious decision against default and against leaving the euro, a decision that made "good economic sense" and repeated a pledge that the country would pay its dues.
Among individual gainers, AXA rose 3.4 percent after it confirmed it was in talks with Resolution Group over the sale of its British life insurance arm in a deal worth 2.75 billion pounds ($4.03 billion).
Within the sector, Aegon, ING, Old Mutual and Prudential rose 1.2 to 2.8 percent.
INDUSTRIAL OUTPUT SURGES
Investors' sentiment got a boost from the macro front, with data showing euro zone industrial output in April surged year-on-year more than in any month in almost two decades, bolstering the view that economic recovery could be gathering pace.
Positive sentiment surrounding the prospect of economic recovery also helped boost miners, rising along with metal prices.
Anglo American, Eurasian Natural Resources, Kazakhmys, BHP Billiton, Xstrata and Rio Tinto added 2.3 to 3.7 percent.
Oil giant BP trimmed the sharp gains made on Friday and fell 6 percent. The stock is down about 44 percent since the oil spill in the Gulf of Mexico started in mid-April.
Investors are awaiting the outcome of a board meeting on Monday to discuss whether the company will cut or defer its second-quarter dividend payment.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 advanced 0.6 to 1.5 percent.
The Thomson Reuters Peripheral Eurozone Countries Index rose 2.5 percent.
