The Stoxx Europe 600 index rose by 0.4% on Monday morning, building on gains made last week, which was the best week for the benchmark since March.

The rally was driven by optimism over China's economic recovery and easing inflation, as well as an easing of the energy crisis and a weaker US dollar. The technology and construction sectors led the advance, while utilities lagged.

AstraZeneca was slightly lower after agreeing to buy US biotech company CinCor Pharma for up to $1.8 billion in cash to gain new treatments for hypertension and kidney disease. European stocks have outperformed their more expensive US counterparts by rising 16% from their September low, due to China's economic recovery from Covid-19 restrictions and a weaker US dollar. The outlook for central banks in Europe and the US will be closely watched by investors during the upcoming earnings season.

Liberum Capital's head of strategy, accounting, and sustainability, Joachim Klement, predicts that stocks in Europe and the UK may see a sustainable rally of 20% from a first-quarter bottom after falling 10-15%. Concerns about the energy crisis have largely been alleviated due to mild weather, a wider range of suppliers, and efforts to reduce demand.

Shipping and refining stocks are in focus after a ship was grounded in the Suez Canal, disrupting traffic in the vital global trade route, but it was later refloated. Global assets linked to Brazil are also being closely watched after supporters of former President Jair Bolsonaro stormed the country's top institutions on Sunday, testing the leadership of President Luiz Inacio Lula da Silva just a week after he took office.