European stocks rebound from worst drop in two weeks

European stocks rebounded from their worst drop in two weeks, led by advances in health-care and utility shares.

Volkswagen tempered gains, tumbling 19 per cent after admitting to systematically cheating on US air pollution tests for years. LEG Immobilien jumped 4.2 per cent after Deutsche Wohnen offered to buy it.

Shire led health-care shares higher, up 3.1 per cent after winning European approval for its treatment of attention deficit hyperactivity disorder.

Uncertainty over the Fed’s moves has stoked volatility in European stocks in recent days.

After the central bank’s decision to keep rates unchanged sent shares lower on Friday amid questions about global growth, three Fed officials argued over the weekend that an interest-rate increase is still warranted this year.

“Fundamentally, we have good buying opportunities in Europe, but on a day like this it’s very difficult to come up with many positive arguments,” said Guillermo Hernandez Sampere, who helps manage the equivalent of $167 million as head of trading at MPPM in Eppstein, Germany.

“On Friday, market dropped so much that we have a friendly opening this morning. The picture would be friendlier if Volkswagen hadn’t happened.”

The Stoxx Europe 600 Index added 0.6 per cent as of 10.13am in London, after fluctuating between gains and losses and dropping as much as 0.2 per cent.

The US decision adds pressure on European Central Bank president Mario Draghi to act.

He and other Governing Council members will make public appearances this week, while data on consumer confidence and manufacturing will give clues on the region’s recovery. Traders are pricing in a 20 percent chance the Fed will raise rates next month, and almost even odds of an increase in December.

“What will dominate in the next days will be bets, if Fed raises rates this year or not,” Sampere said.

Among other shares active on corporate news, RSA Insurance plunged 21 per cent after Zurich Insurance abandoned an offer for it. Zurich slipped 1.3 per cent after saying it expects a loss in its general insurance business.

Dialog Semiconductor slid 16 per cent after the chipmaker said it will buy Atmel for about $4.6 billion.

News of Volkswagen cast a shadow on other carmakers too. BMW, Renault and Daimler all declined 3.9 per cent or more.

In Greece, Alexis Tsipras and his party Syriza won the country's second election in eight months. Tsipras, who came into power the first time around pledging to end austerity must now implement the spending cuts and tax increases he ended up agreeing to after a standoff with euro region leaders.

The ASE Index lost 0.2 per cent.