European stocks rose to five-year highs on Monday in a broad-based rally as news Lawrence Summers has pulled out of the race to lead the U.S. Federal Reserve bolstered expectations for easier monetary policy for longer.
Demand for equities was also boosted by an international deal to destroy Syria's chemical arsenal, which put off a U.S.-led attack against the country and allayed concerns of a broader conflict in the oil-producing Middle East.
The FTSEurofirst 300 was up 0.6 percent at 1,258.15 points by 0733 GMT, its highest level since mid-2008, while Germany's DAX, up 0.8 percent at 8,578.58, was trading at an all-time high. The euro zone's blue-chip Euro STOXX 50 , meanwhile, firmed 0.7 percent to 2,887.58.
Markets took the view that the Fed would take a more gradual approach to tightening its policy since Summers is seen as less supportive of the bank's equity-friendly monetary stimulus programme than the other main candidate, Janet Yellen.
"It's just one threat that's been removed and I think that explains the rally," Ian Williams, equity strategist at Peel Hunt said.
"The perception is that Yellen's likely to be more dovish, so that's the knee jerk element of it, and I think it reinforces the view that we're going to get some modest tapering, but overall, monetary policy and stimulus is going to remain intact to a sizeable extent."
Summers' decision comes just before the central bank meets on Tuesday and Wednesday to decide when and by how much to scale back its asset purchases which have helped the Euro STOXX 50 rise nearly 10 percent in the past year.
Charles Stanley technical analyst Bill McNamara said that while the Euro STOXX 50 is currently at its highest level since mid-2011, its 14-day relative strength index (RSI) is still below recent peaks of around 73 reached in mid-August.
The RSI, a widely used momentum indicator, hit 66 on Monday, with 70 and above considered as 'overbought'.
"There is still scope for further upside and the chart is now pointing towards the possibility of a run up to 2,920 or so in the near term," he said.
