By Peter Nurse

Investing.com - European stock markets traded higher Monday, with improved German business sentiment helping the tone despite worries about inflation and rising interest rates weighing heavily on the global economic outlook.

By 4:05 AM ET (0805 GMT), the DAX in Germany traded 1% higher, the CAC 40 in France rose 0.4%, and the U.K.’s FTSE 100 climbed 0.9%.

The week has started on an upbeat note, following on from gains by regional indices on Friday, helped by China easing a key interest rate, suggesting that the authorities in Beijing are keen to support the second largest economy in the world.

Helping the tone Monday was the release of a better than expected Germany’s Ifo business climate index for May, which rose to 93.0 revised from 91.9 in April. The index had been expected to fall as soaring input costs were seen weighing on sentiment.

However, a great deal of uncertainty remains, given concerns about inflationary pressures exacerbated by the ongoing war in Ukraine, the associated tightening by central banks, and in the Federal Reserve in particular, and slowing economic growth.

Also of interest will be the World Economic Forum which kicks off in Davos this week after a two-year pandemic-enforced hiatus, with Russia’s invasion of Ukraine expected to feature heavily.

In the corporate sector, Kingfisher (LON:KGF) stock rose 3.1% after the home improvement company reiterated its profit guidance, even as faster inflation risks might deter British consumers from renovating their homes.

Moonpig (LON:MOONM) stock soared 12% after the personalized greeting cards provider announced plans to buy Smartbox Group, with the gift experiences platform likely to increase its margins in the medium term.

Deutsche Euroshop (ETR:DEQGn) stock rose over 40% after a consortium of bidders offered 1.4 billion euros ($1.49 billion) to acquire the German shopping center investor.

Oil prices edged higher Monday, boosted by the expectation of renewed demand as Shanghai prepares to reopen at the beginning of June after a two-month lockdown and ahead of the start of the main U.S. driving season.

Lockdowns in China, and the commercial hub Shanghai, in particular, to combat a prolonged COVID outbreak have hammered industrial output and thus fuel demand from the world’s top crude importer.

Additionally, U.S. fuel demand should soon pick up, with the U.S. peak driving season traditionally beginning on Memorial Day weekend at the end of May and ending on Labor Day in September.

By 4:05 AM ET, U.S. crude futures traded 1% higher at $111.38 a barrel, while the Brent contract rose 1.1% to $111.23.