European shares jumped for a fifth straight session on Monday, led higher by financials, as investor sentiment improved following further assurances over the health of the U.S. banking sector.
At 0948 GMT, the FTSEurofirst 300 index of top shares was up 2.3 percent at 718.41 points, extending the previous session's gain of 0.8 percent. But it is still down 14 percent this year after plunging 45 percent in 2008.
The broader STOXX 600 was up 2.1 percent at 172.15 points, with banks and insurers topping the gainers list.
Among banks, UBS rose 6.6 percent, Societe Generale was up 6.5 percent, Natixis jumped 8.6 percent and Dexia climbed 14 percent, as sentiment improved following positive comments made by U.S. banks last week.
Executives from Citigroup, Bank of America and JPMorgan Chase said their banks had been profitable for the first two months of the year and attempted to soothe worries about the chances of government nationalisation of the sector.
Barclays jumped 14.6 percent after the British bank confirmed it has held talks over the potential sale of its iShares unit, but said it had not yet decided whether to proceed with any disposals.
"Many banks, including Barclays, have referred to strong trading in the early part of the year, yet investors and, in some cases, regulators continue to demand higher capital ratios," Cazenove said in a note.
"In this context, we expect a material capital gain from the disposal of iShares would strengthen Barclays' position in its Asset Protection Scheme negotiations with government."
HSBC also said it had no need to raise further cash, removing some of the uncertainty over possible further fund-raising by Europe's biggest bank. HSBC was up 0.6 percent.
Across Europe, the FTSE 100 index, Germany's DAX and France's CAC 40 were up 1.6 to 2.4 percent.
CAUTIOUS APPROACH
Investors were expected to stay cautious on equities as the financial system remains fragile, despite a $700 billion bailout of the banking system approved by U.S. Congress in October.
Ministers from the world's largest economies pledged to regulate hedge funds and start closer checks on credit ratings agencies to prevent a repeat of a financial markets crisis that is crippling businesses and putting millions more out of work.
U.S. Federal Reserve Chairman Ben Bernanke also suggested on Sunday that the U.S. recession could last most of the year and said the biggest risk was that the political will needed to fix the fractured financial system could be lacking.
"The eternal battle between the bulls and the bears will intensify this week," said Chris Hossain, senior sales manager at ODL Securities.
"Whilst it is hard to say if we have seen the worst, we certainly haven't seen a week like last week in a long time."
The FTSEurofirst 300 closed higher for a second week in a row on Friday after slipping for 4 consecutive weeks.
Several energy companies fell as crude prices dropped 4.6 percent. BP, Tullow Oil and StatoilHydro were down 0.7-2.4 percent.
Among miners, Rio Tinto fell 2.1 percent after Australia extended its review of Chinese aluminium maker Chinalco's $19.5 billion investment in the global miner, as major Rio shareholders voiced growing concern over the deal.
Italy's Banco Popolare fell 4 percent. It said it would launch a buyout offer for affiliated Banca Italease at 1.50 euros a share and delist it as part of a reorganisation, Popolare and other shareholders said.
