By Shreyashi Sanyal and Ankika Biswas
(Reuters) -European shares closed on Monday at a more than seven-week high as a jump in travel and technology stocks helped outweigh a drag from China-exposed luxury giants.
The benchmark STOXX 600 index rose 0.3%, extending gains after its third straight weekly rise.
Gains in Flutter Entertainment Plc and Ryanair, up 4.2% and 3.8% respectively, drove Europe's travel & leisure stocks to a near three-month high. The index closed up 1.6%.
An arbitrator on Friday reaffirmed Fox Corp has 10 years to exercise its option to acquire an almost one-fifth stake in Flutter-owned betting app FanDuel.
Irish stocks jumped 1.9%, lifted by Ryanair after the airline posted its largest ever first-half after-tax profit and said it expected to return to pre-COVID-19 annual profit level this year.
Investors' focus will be on Tuesday's U.S. midterm elections, which will determine control of Congress. Republicans have picked up momentum in polls and betting markets and analysts expect a split government - with the Republicans winning the House of Representatives and possibly the Senate.
"It tends to be one boat lifts them all. If the sentiment is positive for the U.S., that tends to lift European stocks as well," said Giles Coghlan, chief market analyst at HYCM.
Meanwhile, European luxury stocks, including LVMH, Pernod Ricard (EPA:PERP) and Hermes International (OTC:HESAF), dipped between 0.7% and 1.5%.
There have been mixed signals about China's reopening. While health officials in China reiterated their commitment to strict COVID-19 curbs over the weekend, Chinese leaders are considering reopening after nearly three years of tough pandemic restrictions with no set timeline.
"If we saw some positive China COVID news and the Republicans winning both the Senate and the House of Representatives, then I would see that being positive for European stocks," Coghlan added.
The STOXX 600 index started November on steady footing, aided by a better-than-expected reporting season and hopes that the Federal Reserve will deliver rate hikes in smaller increments.
A survey on Monday showed investor morale in the euro zone improved in November, reflecting hopes that recent warmer temperatures and falling energy prices will prevent gas rationing on the continent this winter.
Among other stocks, Telecom Italia (BIT:TLIT) jumped 10.7% as top investor Vivendi (OTC:VIVHY) would start talks with Italy's new right-wing government on a new plan to create a national broadband company.
UniCredit slipped 1.9%, hit by a report of tensions between European Central Bank supervisors and the Italian bank over its capital distribution plans and presence in Russia, while GSK lost 4.7% after its blood cancer drug failed a late-stage study.