(Bloomberg) -- European stocks rose as traders were encouraged by diplomatic efforts from the US and its allies to prevent further escalation of the Israel-Hamas conflict and as they braced for the start of the earnings season. 

The Stoxx Europe 600 gained 0.2% at the close in London, with the retail, mining and travel sectors leading the advanced. Health care stocks were the biggest laggards as sentiment in the sector was poor after Pfizer Inc. cut its guidance. 

Meanwhile, Polish stocks jumped more than 5%, led by banks, with the country’s opposition party on course for a majority after Sunday’s election, an upset that would deny the ruling nationalists a third term and steer the country back into the European mainstream.

Among single stocks, Ocado Group Plc fell after Barclays downgraded the online grocer to underweight from equal-weight, saying it sees risks to the company achieving its medium-term guidance. Atos SE soared after announcing that Chairman Bertrand Meunier is stepping down and pushing back the planned closing date for a deal to sell its legacy business to billionaire Daniel Kretinsky. 

The fighting between Israel and Hamas added significant risk to an already fragile economic outlook. Over the weekend, US officials rushed to speak with Middle Eastern nations — including back-channel talks with Iran — to contain the conflict.

Marija Veitmane, senior multi-asset strategist at State Street Global Markets, said market sentiment has been boosted by the hope that diplomatic efforts would keep the Middle East conflict somewhat contained. Still, she recommends caution in “adding risk to the positions now as conflicts can still escalate. Moreover, the concerns about higher-for-longer rates has not gone, which to us is still a very important headwind for stocks and other risky assets.”

Worries around the strength of corporate earnings provided an extra concern for traders at the start of the week. The third-quarter reporting season in Europe will likely be the last with positive EPS growth year-on-year “for a while,” Liberum strategists said in a note. JPMorgan Chase & Co. strategists backed this view, saying current consensus estimates for third-quarter earnings appear undemanding, but slowing economic momentum is pointing to outright negative growth.

Traders also kept track of the latest comments around monetary policy. A surge in global borrowing costs means euro zone rate-setters have probably done enough to tame inflation, said Spain Central Bank Governor Pablo Hernandez de Cos, in an interview with the Financial Times. Still, the European Central Bank won’t lower interest rates until September 2024, according to a new poll of economists — suggesting the message from policymakers that cuts won’t come soon is sinking in. 

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