LONDON (CNN) - European markets ended mixed on Monday after pulling back much of their losses from earlier in the session.
Investors' sentiment rose on the back of hopes in the U.S. that the coming week's corporate earnings will point to a brighter future.
London's FTSE 100 fell 0.2 percent to 5,466.7.
The UK's second-largest mortgage lender, Abbey National (ANL), ended just 0.3 percent lower after earlier dipping 1.5 percent on reports a bid by Lloyds TSB (LLOY) would be blocked.
The British government is likely to back regulators and scupper the merger as early as Tuesday. Regulators said the merger would damage competition in the small business sector. Lloyds ended the day flat after falling 1.3 percent.
In Paris, the CAC 40 blue chip index ended 0.6 percent higher at 5,027.37.
Luxury goods retailer LVMH (PMC) topped the leader board, up 7.6 percent after it posted a 12 percent rise in first-half sales. Consumer electronics company Thomson Multimedia (PTMM) rose 2.6 percent.
The world's biggest insurer, AXA (PCS), climbed 1.7 percent.
The media sector again was out of favour on concerns ad revenues may fall as companies cut back on spending amid a global economic slowdown.
Vivendi Universal (PEX), Europe's biggest media company, ended slightly off after recouping earlier losses but France's biggest TV broadcaster, TF1 (PTFI), ended down by nearly 1 percent.
In techs and telecoms, Alcatel (PCGE), Europe's fourth-largest telecom equipment maker, recovered losses to close 1.7 percent higher. Analysts said the stock had fallen amid expectations it could be a bidder for troubled UK rival Marconi (MONI), which issued a profit warnings last week that led to its stock plunging more than 60 percent.
Marconi rose 7.2 percent in London, the top gainer there, in light of it being a potential bid target.
Finland's Nokia, the world's biggest mobile phone maker, slid 4.1 percent but cross-border rival Ericsson, the biggest supplier of mobile phone networks, rose just over 1 percent. Siemens (FSIE), the German communication and engineering conglomerate, fell 2.9 percent.
Frankfurt's electronically traded Xetra Dax was flat at 5,865.90, with Europe's No. 2 chipmaker Infineon Technologies (FIFX) sliding 3.6 percent, the main loser on the index.
In Amsterdam, the AEX index slid 0.3 percent as Europe's biggest consumer electronics company, Philips Electronics, fell 1.2 percent.
But the world's biggest supplier of chip making equipment, ASML, climbed 1.5 percent.
The SMI in Zurich was 0.2 percent higher and Milan's MIB30 index rose 0.6 percent.
The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was off 0.2 percent.
U.S. stocks bounced higher Monday morning as investors displayed modest optimism that quarterly corporate results will not be as bad as the corporate warnings that flooded the markets over the past month.
In midday trade, the Dow Jones industrial average rose 37.90 points to 10,290.25. The Nasdaq composite index gained 19.66 points to 2,023.82 while the S&P 500 rose 5.63 to 1,196.22.
In the currency market, the euro rose a shade against the U.S. dollar, fetching 84.82 U.S. cents compared with 84.76 cents in late New York trading on Friday. 
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