Equities in Europe advanced as Germany's central bank said the nation's economy is showing signs of recovery in the first quarter of the year.
"The largely stable labour market and a better outlook for output suggest that the economic weakness won't last all that long," according to the Bundesbank in its monthly report released today.
The bank forecasts the economy to grow 0.4 per cent in 2013 year and 1.9 per cent in 2014. Europe's largest economy contracted 0.5 per cent in the fourth quarter of 2012, data last week showed.
Meanwhile, euro zone finance ministers gathered for their first meeting of the year. At the top of their agenda is the financial situation in several peripheral economies including Spain. In addition, the ministers will be discussing how to provide financial help directly to the region's banks.
Europe's Stoxx 600 Index ended the day with a 0.3 per cent increase from the previous close. Germany's DAX and France's CAC 40 both climbed 0.6 per cent, while the UK's FTSE 100 rose 0.4 per cent.
Transportation remains snarled in the UK and France as a winter storm buffets the area, renewing concerns about the economic outlook. In Germany, a weekend electoral loss for Chancellor Angela Merkel's coalition could block efforts for her government to pass legislation.
US markets were closed for the Martin Luther King Jr holiday on Monday as President Barack Obama celebrated the official start of his second four-year term.
Republicans are gearing up for a Wednesday vote that is expected to provide temporary relief for the US Treasury's debt ceiling, expected to be reached as early as next month.
The yen rose against the greenback, climbing from the lowest level since June 2010, amid expectations the Bank of Japan will announce further monetary policy easing measures.
The central bank's two-day policy meeting is expected to result in a doubling of the inflation target and an expansion of its asset-purchase program. The BOJ will increase asset purchases this week, according to all 23 economists in a Bloomberg News survey, with the median estimate for a 10 trillion-yen increase.
"It's hard to see what the BOJ could say ... that would exceed market expectations," Daragh Maher, a currency strategist at HSBC Holdings in London, told Bloomberg News. "It's a natural positioning ahead of the Bank of Japan's meeting given the yen's decline."