European stocks rose Monday on hopes that German Chancellor Angela Merkel is close to forming a government, dealers said.

London equities gained 0.3 percent on Cyber Monday that has become increasingly popular in Britain over recent years.

Frankfurt and Paris meanwhile each added 0.2 percent in value, setting aside earlier lows on the Shanghai stock market.

"A groggy start has given way to some decent growth this Monday, with European investors seemingly ignoring China’s three-month lows to focus on the political progress in Germany," said Spreadex analyst Connor Campbell.

A renewed coalition between Merkel's CDU/CSU conservatives and the centre-left Social Democrats is "the best option for Germany", CSU head Horst Seehofer said Sunday, raising hopes for an end to the political impasse.

Merkel has been scrambling to avert snap elections after talks to form a new government with the pro-business Free Democrats (FDP) and the left-leaning Greens broke down a week ago.

The Social Democrats had vowed to go into opposition after a disappointing showing in the September general election, but in a U-turn on Friday SPD chief Martin Schulz said he was ready for talks with Merkel's bloc.

"Political optimism is picking up in Germany," added analyst David Madden at CMC Markets.

"The Germany economy has been managing just fine without a functioning government for the past two months, but investors would welcome some political stability."

- Mixed fortunes for retailers -

Back in London, retail shares experienced mixed fortunes despite hopes of a fresh sales boost from Monday's online price cuts.

Clothing-to-food retailer Marks and Spencer won 1.0 percent to 300.80 pence but supermarket giant Tesco was down 0.2 percent at 192.20 pence.

Asian markets fell Monday on profit-taking after last week's volatility.

The region's investors ignored another strong lead from Wall Street, where the S&P 500 and Nasdaq chalked up fresh records on expectations of strong sales on Black Friday and Cyber Monday -- two major post-Thanksgiving shopping days.

Shanghai slipped almost one percent, with dealers still on edge after Thursday's sharp losses fuelled by concerns about a crackdown on speculative trading.

- Key figures around 1145 GMT -

London - FTSE 100: UP 0.3 percent at 7,434.80 points

Frankfurt - DAX 30: UP 0.2 percent at 13,082.30

Paris - CAC 40: UP 0.2 percent at 5,403.52

EURO STOXX 50: UP 0.3 percent at 3,590.96

Tokyo - Nikkei 225: DOWN 0.2 percent at 22,495.99 (close)

Hong Kong - Hang Seng: DOWN 0.6 percent at 29,686.19 (close)

Shanghai - Composite: DOWN 0.9 percent at 3,322.23 (close)

New York - DOW: UP 0.1 percent at 23,557.99 (close)

Euro/dollar: DOWN at $1.1930 from $1.1933 at 2200 GMT

Pound/dollar: UP at $1.3351 from $1.3338

Dollar/yen: DOWN at 111.26 yen from 111.53 yen

Oil - Brent North Sea: DOWN 16 cents at $63.70 per barrel

Oil - West Texas Intermediate: DOWN 41 cents at $58.54