By Shashank Nayar and Shriya Ramakrishnan
(Reuters) - European shares jumped on Monday as encouraging developments around a coronavirus vaccine spurred bets of a faster economic revival globally, even as a surge in infection rates clouded near-term outlook.
The pan-European STOXX 600 index rose 0.4% by 0945 GMT and hit a fresh high since late February, with energy and banking sectors leading gains.
The benchmark index has gained nearly 40% from its March lows, helped by a flood of stimulus measures, but gains remain capped as investors weigh risks of rising COVID-19 infections against hopes of a vaccine supporting a recovery.
AstraZeneca (NASDAQ:AZN) said its COVID-19 vaccine, developed along with the University of Oxford, could be around 90% effective under one dosing regimen.
The company's shares however slipped 2%, with traders attributing the drop to its vaccine showing lower efficacy than rivals such as Pfizer (NYSE:PFE), which has reported the highest efficacy rate of 95% so far.
Euro zone business activity contracted sharply in November as fresh virus restrictions across European countries forced many firms in the bloc's dominant service industry to close temporarily, a survey showed.
Manufacturing activity, however, remained a bright spot as many factories remained open during lockdowns.
"The survey data now has given an indication into how vaccine optimism in the market is translating into the economy," said Bert Colijn, senior economist for euro zone at ING.
"I think we get the confirmation that companies are indeed getting more optimistic about future output, as vaccine developments are obviously moving in the right direction."
Regional stocks were also buoyed by hopes of a swifter economic recovery, after the British government said it was working with Scotland, Wales and Northern Ireland to ease COVID-19 restrictions over Christmas.
That helped UK's FTSE 100 index gain 0.3%, along with hopes of a post Brexit-trade deal with the European Union. (L)
Among individual stocks, French bank Credit Agricole (OTC:CRARY) jumped 3.9% after its Italian unit launched an offer to buy Italian bank Credito Valtellinese (Creval).
Germany's HelloFresh fell 3% after the company said it bought Factor75, a U.S. provider of fully prepared meals, for up to $277 million.