European stock markets closed higher on Monday, extending last week's sharp gains on growing optimism the global economy is finally on the mend after the worst slump in decades, dealers said.

They said sentiment got a boost from reports that a rescue deal had been reached for CIT, a US lender to small- and mid-sized businesses, helping ease concerns that the recovering financial sector could face a fresh setback.

Much better-than-expected results at Goldman Sachs got the markets going last week and investors hope upcoming corporate reports will confirm the view that the economy has turned the corner on the worst downturn since the 1930s.

Sharp gains in Asian trade, with Hong Kong up 3.7 percent, set the tone for Europe and a solid start on Wall Street kept the ball rolling.

In London, the FTSE 100 index of leading shares gained 1.25 percent to 4396.75 points. In Paris, the Cac 40 rose 1.63 percent to 3270.94 points and in Frankfurt the Dax added 1.04 percent to 5030.15 points — breaching the key 5000 points resistance level.

Dealer Nick Mitchell at CMC Markets said "growing optimism surrounding the state of the global economy is helping to continue the recent rally in stocks and increase risk appetite."

Elsewhere in Europe, Amsterdam was 1.16 percent higher, Brussels put on 1.07 percent, Madrid rose 1.00 percent, Milan gained 1.21 percent and Switzerland's SMI added 0.60 percent.

In Asia earlier on Monday, Hong Kong closed 3.7 percent higher at 19 502.37 points as the improving outlooks for the US and Chinese economies sent the benchmark Hang Seng index above the 19 000 level for the first time in 10 months, dealers said.

Financial markets in Japan were closed on Monday for a public holiday.

AFP

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