By Peter Nurse 

- European stock markets traded higher Monday, as M&A speculation helped to the market start the new week on a positive tone and shrug off the return of Covid-induced restrictions to the continent.  

At 3:45 AM ET (0845 GMT), the DAX in Germany traded 0.1% higher, the CAC 40 in France also rose 0.4% and the U.K.’s FTSE 100 climbed 0.4%.

The major equity indices in Europe have shown strength of late, boosted by strong corporate earnings and helped by the European Central Bank resisting the temptation to join a growing list of central banks that are tightening monetary policy. That has pushed the euro to its lowest in 16 months against the dollar and its lowest in 21 months against the pound.

Investors will be studying the return of Covid-19 restrictions to the region, with Austria starting its fourth national lockdown since the start of the pandemic. 

This move is meant to put a brake on infections before mandatory vaccinations kick in from February. That would be the first such policy in Europe, where governments have mostly kept inoculations voluntary.  

Neighboring Germany also refused to rule out a lockdown on Friday, while the likes of Ireland and the Netherlands have encouraged working from home in order to try and contain the spread of the virus.

If the whole of Europe is forced into these extreme restrictions once more, investors would have to rethink growth scenarios and expectations for fourth-quarter earnings.

In the corporate sector, Telecom Italia (MI:TLIT) stock soared 24% after the company confirmed over the weekend that it has received a 10.8 billion euro ($12 billion) approach from U.S. fund KKR aimed at taking Italy's biggest phone group private. Other incumbent telecoms also rose, with BT Group (LON:BT) stock rising 3.2% and Telefonica (MC:TEF) stock rising 4.1%. Dutch-based Koninklijke KPN (AS:KPN) stock rose 2.4%.

On the flip side, Ericsson (BS:ERICAs) stock fell 3.4% after the Swedish mobile telecoms equipment maker agreed to buy cloud communications firm Vonage (NASDAQ:VG) for $6.2 billion.   Marks & Spencer stock rose 3.5% to a fresh 2 1/2-year high after a report suggesting that private equity firm Apollo Global Management  (NYSE:APO) may be preparing a bid for it.

In earnings news, Julius Baer (SIX:BAER) stock fell around 4% after the Swiss bank reported a reduction in its gross margin, reflecting a softening in client activity from exceptionally high levels witnessed last year.

Crude prices edged higher Monday, recovering to a degree from the sharp selloff at the end of last week.

Japanese Prime Minister Fumio Kishida signalled on Saturday he was open to exploring a way to release oil from the country’s strategic reserves, joining a group of top consumers following a request from the U.S. last week.

By 3:45 AM ET, U.S. crude futures traded 0.9% higher at $76.62 a barrel, while the Brent contract rose 0.8% to $79.54. Both benchmarks hit their lowest levels since the start of October earlier in the session, having fallen around 3% on Friday. 

Additionally, gold futures fell 0.2% to $1,847.80/oz, while EUR/USD traded 0.1% lower at 1.1277.