LONDON (AFP) - European stock markets rose on Monday, with support coming from gains to banking shares after regulators relaxed rules on lender capital buffers.
London's benchmark FTSE 100 index ending the day up 0.26 percent at 6,757.15 points, while Frankfurt's DAX 30 rose 0.39 percent to 9,510.17 points and the CAC 40 in Paris added 0.30 percent to 4,263.27 points.
Rome climbed 0.66 percent and Madrid gained 0.73 percent.
The euro dipped as traders booked profits from recent gains by the single currency.
"The financial heavyweights were helped higher by a decision by regulators to relax the Basel ruling on capital requirements, giving them some welcome breathing space and hopefully a potential boost in returns," said CMC Markets senior trader Toby Morris.
Central banks have agreed to relax a key provision of reforms drafted after the global financial crisis to strengthen commercial banks.
The Basel Committee, which oversees the implementation of reforms that will be applied in 27 countries, issued the amendments late on Sunday.
Banking shares rallied in reaction. Commerzbank shares jumped by 5.5 percent to 13.69 euros, followed by Deutsche Bank with a gain of 4.7 percent to 38.57 euros.
In London Royal Bank of Scotland rose 3.1 percent to 368 pence and Barclays advanced by 2.9 percent to 291.7 pence, while in France, Societe Generale added 2.2 percent to 44.95 euros and BNP Paribas finished up 1.0 percent to 57.95 euros.
As part of their business of lending, banks acquire more assets, or risks, than the capital they hold, and this ratio is called leverage.
The Basel III reforms, which are being implemented over the coming years, require that banks limit assets to three times the amount of capital.
There have been concerns that with the higher ratio, lending could be crimped.
Changes proposed on Sunday allow banks to exclude much of their short-term finance operations for the purpose of calculating the ratio and only include their net positions.
In foreign exchange trading, the European single currency slid to $1.3643 from $1.3663 late on Friday in New York.
But the dollar fell against the yen, buying 103.34 of the Japanese currency against 104.10 on Friday.
The euro rose to 83.30 British pence from 82.91 pence Friday. The British pound fell to $1.6378 from $1.6480.
Gold prices rose to $1,248 an ounce from $1,227.50 on the London Bullion Market on Friday.
The dollar faced further selling pressure in early exchanges after tumbling on Friday in response to official US employment figures, but later rebounded against the euro and pound.
Asian stock markets meanwhile diverged on Monday after the worse-than-expected US jobs report prompted speculation the Federal Reserve may hold off on any fresh cuts to its stimulus programme.
The Labor Department said Friday the US economy added just 74,000 jobs in December, well below the 197,000 expected by analysts.
At the same time it said the unemployment rate dropped to 6.7 percent from 7.0 percent in November, although that was mostly because more people had given up looking for work.
"One reason why equities may not be reacting to the weaker US labour market data is that it makes it less likely that the Fed will speed up the pace of tapering," said Kathleen Brooks, research director at online broker Forex.com.
The central bank will hold its next policy meeting at the end of the month and investors will be closely monitoring it to see if it further reduces its bond-purchasing.
At its most recent meeting, it said it would cut the stimulus by $10 billion a month to $75 billion, citing a strong pick-up in the US economy.
US stocks treaded water on Monday, with traders staying on the sidelines ahead of a number of banks releasing earnings reports later in the week.
In midday trading, the Dow Jones Industrial Average was down 0.10 percent to 16,419.80 points.
The broad-market S&P 500 dipped 0.07 percent to 1,841.06 and the tech-rich Nasdaq edged up 0.08 percent to 4,178.13.