European stocks rose, after their first weekly gain since May 17, as euro-area factory output in June contracted less than estimated and Japanese manufacturers turned optimistic for the first time since September 2011.

The Stoxx Europe 600 Index added 1.2 percent to 288.29 at the close of trading. The benchmark advanced 1.7 percent last week as China took steps to ease a cash crunch. It still lost 5.3 percent in June after Federal Reserve Chairman Ben S. Bernanke said the central bank could taper stimulus measures if the U.S. economy improves sustainably.

In Japan, a central bank report showed the quarterly Tankan index (JNTSMFG) for large manufacturers rose to plus 4 in June from minus 8 in March. The first positive figure since September 2011 signaled that optimists outnumber pessimists. The median estimate of economists surveyed was for 3.

In the U.S., a report showed that factory output in the world's largest economy increased in June. The Institute for Supply Management's manufacturing index rose to 50.9 from 49 the prior month. Economists survey had forecast an increase to 50.5.

National benchmark indexes advanced in all of the western European markets except Iceland.

FTSE 100 6,307.78 +92.31 +1.49% CAC 40 3,767.48 +28.57 +0.76% DAX 7,983.92 +24.70 +0.31%

In China, an official purchasing managers' index of factory output dropped to 50.1, the lowest level in four months, from 50.8, the National Bureau of Statistics and China Federation of Logistics and Purchasing said. A private PMI from HSBC Holdings and Markit was 48.2, the weakest since September. Readings above 50 signal expansion.

Nokia Oyj (NOK1V) jumped 3.7 percent to 2.95 euros after saying it will buy Siemens' 50 percent holding in Nokia Siemens Networks for 1.7 billion euros ($2.2 billion).

Siemens gained 2.6 percent to 79.63 euros, its biggest gain since August 2012, after the companies agreed to end their six-year long telecommunications-equipment joint venture.

Hennes & Mauritz AB (HMB) added 4 percent to 229.30 kronor after Bank of America Corp. raised its recommendation on the shares to buy from neutral, citing an improved outlook for the retailer's online business.

Hunting Plc (HTG) rallied 9 percent to 798 pence, its biggest gain since August 2011, after the U.K. oil-services provider said first-half results will meet analysts' estimates and that its outlook remains positive for the rest of the year.

Peugeot fell 2.5 percent to 6.17 euros after data showed the carmaker's registrations in France fell 9.5 percent to 57,962 in June.