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London - European stock markets rose on Monday, retracing some of last week's heavy losses after news of a Portuguese state rescue for Banco Espirito Santo.
Banking shares got a particular boost from news of the nearly $6.7bn, announced late on Sunday, which had rattled European markets for weeks.
In mid-afternoon trading, London's benchmark FTSE 100 index rose 0.40% to stand at 6 706.14 points.
Frankfurt's DAX 30 was largely flat at 9 206.71 points and in Paris the CAC 40 advanced 0.71% to 4 232.58 compared with Friday's close.
Portugal's PSI 20 index also gained 1.75% to trade at 5 899.27 points after news of the EU-backed rescue plan.
"Slightly supportive for European shares is the announcement that the Bank of Portugal has taken over control of Banco Espirito and submitted a rescue plan for Portugal's second-biggest lender," said Markus Huber, senior analyst at brokers Peregrine & Black.
Global equity markets were rattled last week by patchy earnings reports and concerns that the US central bank could end its economic stimulus earlier than expected.
Wall Street's S&P 500 index posted its worst weekly loss in more than two years last week - fuelled by debt concerns in Argentina and concerns about the impact of Western sanctions on Ukraine.
"We've already heard names like Adidas, Siemens and Volkswagen speaking out about how their businesses are being affected by tensions in Ukraine and Russia," said Chris Weston at IG Markets.
US stocks also opened higher, recovering some of last week's losses when the Dow Jones Industrial Average shed its gains for the year in its worst week since January.
Five minutes into trading, the Dow added 0.04% at 16 500.21.
The broad-based S&P 500 gained 0.17% to 1 928.33, while the tech-rich Nasdaq Composite Index rose 0.32% to 4 366.76.
Portugal will inject $5.9bn into Banco Espirito Santo (BES), national bank governor Carlos Costa announced late Sunday, amid fears of a catastrophic bank run.
The bank will be split into two entities, with its toxic assets isolated and its healthier assets regrouped in a new Novo Banco, Costa said.
Banking shares rallied on the news, with BNP Paribas jumping 1.31% to €50.41 and Santander winning 0.42% to €7.44.
HSBC also gained 1.54% to 639 pence as investors brushed aside news of a drop in first-half profits. The bank said earnings fell in the six months to the end of June because one-off gains were not repeated and after a weaker showing at its investment arm.
Meanwhile in foreign exchange trading on Monday, the euro dipped to $1.3424 from $1.3430 late in New York on Friday.
The European single currency eased to 79.71 pence from 79.82p on Friday. The pound rose to $1.6841 from $1.6817.
The European Central Bank and Bank of England both meet this week to set their respective interest rates.
On the London Bullion Market, the price of gold climbed to $1 293.50 an ounce from $1 291.25.
Asian stock markets ended mixed on Monday as traders reacted to Chinese data showing a recovery in the world's second-largest economy, as well tracking Portugal and Friday's US jobs data.
The Labor Department reported that the US economy added 209 000 jobs in July, down from June but maintaining the solid 200 000-plus monthly streak since February.
