Nov 24 (Reuters) - European shares nudged higher on Monday, supported by heavyweight banks, as investors took comfort in growing expectations of a U.S. interest rate cut, while keeping a close watch on progress toward a Ukraine peace plan.
The pan-European STOXX 600 (.STOXX), gained 0.4% to 564.35 points by 0953 GMT. The index had logged its steepest weekly drop since late July on Friday.
U.S. Federal Reserve policymaker John Williams said on Friday interest rates could fall "in the near term", bolstering the likelihood of a cut during the central bank's December meeting. His remarks, however, contrasted with other officials who urged caution on further reductions until there is greater clarity on the health of the U.S. economy.
Heavyweight bank (.SX7P), stocks gained 0.6%, technology stocks (.SX8P), rose 0.8%, while the construction and materials sector (.SXOP), added 1.4%.
European auto stocks (.SXAP), gained 1.4%. Goldman Sachs sees premium European carmakers as the most undervalued. The broker initiated coverage on Mercedes (MBGn.DE), BMW (BMWG.DE), and Ferrari (RACE.MI), with a "buy" rating. Their shares rose between 0.9% and 1.4%. It started Stellantis (STLAM.MI), up 2.7%, with "neutral".
Defence stocks in Europe (.SXPARO), lost 1.3%, extending their 3% decline on Friday, as peace talks progressed.
The U.S. and Ukraine pressed on with talks in Switzerland to come up with a mutually acceptable peace plan, after agreeing to modify an earlier proposal that Kyiv and its European allies saw as a Kremlin wish list.
"On Sunday, the U.S. said this week's deadline to accept the deal is not a hard deadline, and there could be some leeway on the terms.
This suggests that Donald Trump's peace plan still stands a chance, especially if he is willing to make concessions to the Ukrainians," Kathleen Brooks, research director at XTB, said in a note.
"The oil price is stable on this news, and signs that negotiations are ongoing could help to boost risk sentiment at the start of a new week."
Renk (R3NK.DE), Rheinmetall (RHMG.DE), Hensoldt (HAGG.DE), and Saab (SAABb.ST), declined between 2.7% and 3.6% and were among the top losers on the STOXX 600 index.
Bayer (BAYGn.DE), gained 9.3% to top the STOXX 600, after initial clinical trial results turned around the fortunes of a key cardiovascular drug that suffered a major development setback two years ago.
British homebuilder Vistry (VTYV.L), gained 6.4% after Goldman Sachs initiated coverage with "buy".
Siemens Energy (ENR1n.DE), rose 4%, rebounding from Friday's 10.1% fall. Software company Nemetschek (NEKG.DE), added 4.4% after Jefferies initiated coverage with "buy".
Lender Julius Baer (BAER.S), concluded a credit review with further write-down. Shares of the Swiss bank fell 3.1%.
A survey showed German business morale unexpectedly fell in November. Investors will be hawk-eyed on the British annual budget on Wednesday amid uncertainty over tax hikes and U.S. economic data through the week.
Reporting by Purvi Agarwal and Sukriti Gupta in Bengaluru; Editing by Janane Venkatraman and Shilpi Majumdar
