European shares climb ahead of U.S., euro zone data

The pan-European STOXX 600 ended 0.5% higher, edging closer to the two-year highs it reached earlier this month, while the euro zone blue-chip STOXX50E index was at levels not seen since 2001

European shares jumped on Monday, tracking a strong rally on Wall Street, while investors looked forward to a key U.S. inflation figure and a slew of economic data from the euro zone this week.

The pan-European STOXX 600 ended 0.5% higher, edging closer to the two-year highs it reached earlier this month, while the euro zone blue-chip STOXX50E index was at levels not seen since 2001.

Real estate shares led most European sectoral indexes higher with gains of 1.6%, followed by retailers, which gained 1.4%.

In the U.S., investors will closely monitor the January consumer price index (CPI) reading on Tuesday for clues on the potential timing of a rate cut by the Federal Reserve.

Headline consumer inflation is anticipated to slow on both a monthly and yearly basis.

There is optimism "that tomorrow's CPI print from the U.S. will again confirm inflationary pressures are heading lower still", said Stuart Cole, chief macro economist at Equiti Capital.

He said that European stocks are also getting a lift from the recent rally on Wall Street. The S&P 500 closed above 5,000 for the first time on Friday, propelled by bets on the potential for AI.

This week is also packed with domestic economic data, including Q4 euro zone GDP growth, consumer price inflation from Spain and other regions, and ZEW economic sentiment surveys.

Italian stocks outperformed regional peers with a 1.0% gain, reaching their highest level since June 2008. The UK's FTSE 100 was a laggard, ending flat.

Also supporting equities was a drop in European bond yields after dovish remarks from European Central Bank Governing Council member Fabio Panetta on Saturday.