By Anisha Sircar and Susan Mathew
(Reuters) - European shares rose on Monday after their worst selloff in more than a year as investors awaited clues on whether the Omicron variant of coronavirus would hamper economic recoveries and monetary tightening plans by central banks.
The pan-European STOXX 600 ended up 0.7%, logging its best day in a month and recovering some of Friday's 3.7% slump triggered by concerns around the newly discovered variant.
While the variant was spotted in several countries across the globe, a South African doctor, who was one of the first to suspect a different strain, said that symptoms were so far mild and could be treated at home.
Travel and leisure stocks rose, with Wizz Air, Lufthansa, TUI Group and Ryanair and Carnival (NYSE:CUK) all rising between 1% and 5.5% after double-digit falls on Friday on fears of renewed travel restrictions.
Financial stocks added 1.7%, while energy and basic material stocks were also among the biggest boosts as prices of the underlying commodities rose.
London's FTSE 100 jumped 0.9% with investors also betting the Bank of England may be forced to rethink monetary policy tightening next month.
"The emergence of the Omicron variant has now crystalised fears that we're not out of the woods just yet... and led to a shift in monetary policy expectations," said Laith Khalaf, head of investment analysis at AJ Bell.
"The fact that markets have now alighted on February as the likely month for a UK interest rate rise shows there is still considerable optimism that Omicron is a stumbling block, rather than a brick wall."
Meanwhile, the European Central Bank argued that the euro zone's economy had learned to cope with successive waves of the pandemic.
But increasing pressure on the central bank, German consumer price inflation rose further in November to hit another record high, data showed on Monday. The German DAX gained the least among regional peers, up 0.2%
BT Group (LON:BT) jumped 6.1% after a report that Indian oil-to-telecom conglomerate Reliance was considering an offer for the UK telecom firm. Reliance denied the report, capping the stock's gains.
Faurecia dropped 7.9% drop after the car parts group trimmed its full-year guidance, citing a drop in European automotive production.
Despite clocking several record highs in November, the STOXX 600 is on course to post monthly losses of about 1.7% as a strong earnings season and diminishing fears around tighter monetary policy were outweighed by concerns around the new variant and fresh restrictions in Europe.