European Stocks Rise as Relief Rally Continues

European stocks rose on Monday.

European stocks rose on Monday, as a sharp rally in the mining and industrial sectors helped the market resume Friday's recovery in the wake of the surprise discount rate cut by the U.S. Federal Reserve.

But renewed concerns over the fallout in the U.S. subprime market kept investors on edge and limited the gains.

The pan-European FTSEurofirst 300 index unofficially closed 0.5 percent higher at 1,481.43 points, adding to Friday's 2.3 percent rally.

Europe's benchmark index, down 0.1 percent on the year, is still down 9.4 percent since reaching a 6-1/2 year high in mid-July.

Among the biggest gainers, BHP Billiton surged 4.2 percent, Arcelor Mittal rose 3.4 percent and ABB gained 2.3 percent.

Equity markets have recently plunged as defaults on risky U.S. subprime mortgage loans hit a flurry of financial institutions and fuelled worries over the potential impact on the credit market and the global financial system.

On Friday, the Fed cut the discount rate it charges banks in an emergency move aimed at stabilizing credit markets after days of sharp selloffs.

"If the market volatility and the uncertainty continue, particularly in the credit market, the Fed will probably come with a cut of its Fed funds rate. It's what the market is now looking for," said Bert Jansen, an equity strategist at Exane BNP Paribas in Paris.