European stocks closed higher on Monday after weak business activity data boosted hopes that the European Central Bank will cut interest rates again this year.

The pan-European Stoxx 600 index closed 0.4 percent higher, recovering some of its losses after its biggest one-day drop since August.

The auto sector led the gains among the major Stoxx sectors, rising 1.9 percent, while the retail sector rose 1.2 percent.

The German DAX index closed 0.7 percent higher, while the French benchmark index closed relatively flat, weighed down by a drop in banking stocks.

The interest-sensitive real estate sector rose 1.3 percent, while utilities, often traded as an alternative to bonds, rose 1.1 percent.

Source: Qatar News Agency