Europe equities slightly higher as financials offset energy

The pan-European STOXX 600 index ended 0.2% higher, staying near its highest level in two years hit on Friday, coming off its best weekly performance in three months

European equities ended slightly higher on Monday after reaching two-year highs in the previous session, led by rising energy shares, while losses in telecoms and financial stocks kept the gains in check.

The pan-European STOXX 600 index ended 0.2% higher, staying near its highest level in two years hit on Friday, coming off its best weekly performance in three months.

Oil and gas stocks held on to their gains during the day, gaining 1.0%, while crude oil prices lost steam in a choppy session.

On the downside, telecoms declined 0.8% with Finnish firm Elisa dropping 4.5% after brokerage Inderes downgraded its rating to "reduce".

Banks slipped 0.5%, while financials shed 0.4%, bogged down by a 3.7% drop in Schroders after Exane BNP Paribas downgraded the UK fund manager's shares and Jefferies raised concerns about the firm's prices-earnings premium.

Looking ahead, investor focus will now be on the U.S. Fed's interest rate decision later this week, with bets of a pause fully baked in and traders split nearly evenly about the first cut coming in March, as per the CME FedWatch Tool.

The Fed has a dual mandate – inflation and employment, said Daniela Hathorn, senior market analyst at Capital.com.

Whilst the former has come a long way in the last year, the jobs market remains very tight in the past, Powell has insisted on the need to see some weakness in the labour market to consider loosening financing conditions, Hathorn added.

In Europe, the ECB's next move will be an interest rate cut but policymakers speaking on Monday differed on the timing of the move and the trigger for action.

Government bond yields across Europe eased as markets fully priced in a first 25 bps rate cut by the ECB in April.

Among stocks headlining on Monday, Holcim climbed 4.7% after the Swiss building materials giant said it would spin off its North American operations.

Bayer shed 4.9% after the German firm was ordered to pay $2.25 billion in damages in its ongoing litigation linked to an alleged carcinogenic effect of its Roundup weedkiller.

Philips dropped 4.4% after the health technology company agreed on the terms of a settlement with the U.S. Food and Drug Administration (FDA) over a large-scale recall of ventilators.