By Barbara Kollmeyer, MarketWatch

Strong PMI data for Italy lifts market

European stocks traded higher on Monday, driven largely by gains for banks across the board and fresh economic data that showed signs of economic strength in Italy.

Volumes were expected to be thin as many traders remained out for an extended New Year's break. Trading was shuttered in London and the U.S. on Monday. Both return to action on Tuesday.

After logging the first annual loss since 2011 -- closing 1.2% lower for 2016 -- the Stoxx Europe 600 index rose 0.6% to 363.47. Banks were a driver, with the Stoxx Europe 600 Bank sector up 0.7%, but all sectors were contributing to the upbeat momentum on Monday, and gainers were outnumbering decliners.

Read:Stock-market bulls wary of new-year hangover (http://www.marketwatch.com/story/stock-market-bulls-wary-of-new-year-hangover-2016-12-31)

Across national indexes, the FTSE MIB shot up 1.7% to 19,561.34, and Germany's DAX 30 index added 0.8% to 11,578.77.

France's rose 0.6% to 4,889.40, while Spain's IBEX 35 index gained 0.7% to 9,413.20.

Economic docket: Final Eurozone manufacturing Purchasing Managers Index data showed a reading of 54.9 in December, matching an initial estimate, but that level remains the highest since April 2011.

Italy manufacturing PMI showed that 2016 finished on a high note as well, with the strongest output growth for six months in December, along with an upturn in new orders.

The headline PMI for Italy registered 53.2 in December, up from 52.2 in November and its highest reading since June. Meanwhile, the final

Movers & Shakers: Italian banks were rising after Reuters reported (http://www.reuters.com/article/italy-factors-jan-idUSL5N1EP28O), citing several Italian newspapers, that troubled Banca Monte dei Paschi di Siena SpA (BMPS.MI) will issue EUR15 billion ($15.77 billion) of debt in 2017 to help boost confidence and liquidity. The bank's shares remain suspended from trading.

The Italian government recently announced a plan to rescue the bank using taxpayer money. European Central Bank Governing Council member Jens Weidmann last week warned that the bank must be put on a sound long-term footing (http://www.marketwatch.com/story/bundesbank-urges-monte-dei-paschi-scrutiny-2016-12-27) without breaching European Union rules on state aid.

Markets have been grappling with fears that mountains of bad loans in Italy could spark a financial crisis in Europe, but banks staged a stellar rally in the last few months of the year as investors looked ahead to higher yields and looser regulations.

Read:European breakdown? Why the continent's stocks are actually set for a solid 2017 (http://www.marketwatch.com/story/why-european-stocks-are-set-for-a-solid-2017-2016-12-28)

Banco Popolare di Milano (PMI.MI) jumped nearly 9%, Mediobanca SpA (MB) rose 3.5%, and UniCredit SpA (UCG.MI) rose 2%.

German banks also got a lift, with Commerzbank AG (CBK.XE) up 3.2%.

Read: These were the best and performing assets of 2016 (http://www.marketwatch.com/story/these-are-the-bestand-worstperforming-assets-of-2016-2016-12-30)

(END) Dow Jones Newswires

January 02, 2017 08:56 ET (13:56 GMT)