By Barbara Kollmeyer
LONDON—European stocks rose on Monday, with the Italian market posting particularly strong gains, while airlines and retailers fell on fears of lost business caused by the severe winter weather.
The euro, however, took a beating, dipping below $1.31 and breaking briefly through its 200-day moving average. It also fell to all-time lows against the Swiss franc.
A Moody's Investors Service downgrade of large Irish banks, and a Moody's warning that a swath of Spanish banks also could face downgrades, triggered fresh worry over the euro-zone's fiscal footings.
The Stoxx Europe 600 index advanced 0.7% to 278.38.
"For money managers, this has been one of the worst years in recent history. Everyone is lagging benchmark [and] people are trying to play some catchup," said Philippe Gijsels , head of research at BNP Paribas Fortis Global Markets. He said many fund managers had too much exposure to bonds and not enough to equities. As a result, "buying equities is going to continue to support markets going into the year end," he said.
Mr. Gijsels said markets will likely run out of steam later in the week, given the Christmas holiday.
In Italy, the FTSE MIB index rose 1.5%, led by a 5.6% rally for shares of Banco Popolare. An Italian newspaper said that the Cariverona Foundation may acquire a 5% stake in the bank, according to the Financial Times.
On the downside, Greece's ASE Composite index slumped 3.2%. National Bank of Greece tumbled nearly 5%.
The weather was responsible for some downside.
Deutsche Lufthansa fell 0.8% after severe weather disrupted flights across Europe. British Airways dropped 1.9%.
Retailers in London also posted losses in the biggest shopping week of the year for the sector.
Next slipped 0.9% and Marks & Spencer Group /zigman2/quotes/206225481/delayed UK:MKS +0.03% was off 0.8%.
The FTSE 100 index ended up 0.3% at 5891.61, as oil-and-gas facilities provider Petrofac /zigman2/quotes/202340229/delayed UK:PFC -1.83% gained 2.5% after it released a bullish trading statement on Friday.
In the U.S., the Dow Jones Industrial Average was weighed down by a slide in American Express /zigman2/quotes/203805826/composite AXP -0.11% , even as other financial companies climbed. Early afternoon, the blue-chip gauge was off nearly 20 points, or 0.2%, at 11472. The Nasdaq Composite edged up 0.2% to 2648 and the Standard & Poor's 500-stock index was up 0.2% to 1246.
Demand for Treasurys increased, sending the yield on the 10-year note down to 3.28% amid heavy buying by the Federal Reserve under its quantitative-easing program.
Autos were a key driver across Europe after upbeat comments from chief executives.
Volkswagen /zigman2/quotes/206736865/delayed DE:VOW -0.52% rallied 3.7% after its executive president for China told Bloomberg News that the market for 2011 looks "pretty healthy." BMW /zigman2/quotes/209548467/delayed DE:BMW +0.27% AG shared the vibes, gaining 1.9%.
The German DAX 30 index rose 0.5% to 7018.60.
Another big gainer in Frankfurt was K+S. The German fertilizer producer rose 1.5% after Chief Executive Norbert Steiner told the Frankfurter Allgemeine Sonntagszeitung that he believes the company's takeover offer for Potash One Inc. of Canada would be successful, according to Reuters.
In Paris, the French CAC 40 index rose 0.5% to 3,885.08, with Peugeot up 0.8% and Michelin up 1.6%.
In the banking sector, Crédit Agricole /zigman2/quotes/200767526/composite ACA +0.79% fell 2.1%. After markets closed on Friday, the bank said it will take a write-down of €1.25 billion in the fourth quarter on its 4.79% stake in Italian bank Intesa Sanpaolo, which rose 2.4%,.
Meanwhile, chemicals group Rhodia surged 7.2% after Morgan Stanley upgraded the firm to "verweight" from "equalweight," saying investors are getting strong earnings growth through 2013 at a 30% discount to the broad specialty chemical sector.
In currency trade, the euro was at 1.2665 francs early afternoon in New York and at $1.3117, after dropping as low as $1.3094.
Among commodities crude oil gained 52 cents to $87.50 and gold futures were up $1 at $1,379.60.
Write to Barbara Kollmeyer at Barbara.Kollmeyer@dowjones.com