By Anisha Sircar and Shashank Nayar
(Reuters) -European shares closed higher on Tuesday, taking heart from strong Wall Street gains, even as Omicron worries persisted with France tightening curbs and COVID-19 cases surging in Spain and Britain.
The pan-European STOXX 600 rose 0.6% to end the session at a five-week high.
Risk appetite remains strong into the year-end, according to analysts, despite the threat of the Omicron coronavirus variant hampering a global economy already tackling slowing growth, supply bottlenecks and soaring prices.
The STOXX 600 is eyeing its best month since March this year, adding 5.5% in December so far, and is on-track to gain around 22.4% in 2021 after falling 4% in 2020.
"Given rich valuations after an enthused, if not euphoric, bull run in 2021, it is not unreasonable to propose that this Santa Rally is clearing a higher bar," said Vishnu Varathan, head of economics and strategy at Mizuho Bank.
Most equity markets in Europe gained, with Spain's IBEX and Germany's DAX leading the way.
Spain's lower house approved the minority leftist government's 2022 budget bill in its final reading after lawmakers voted in favour of a small amendment proposed by the Senate, which had held up the final approval.
While concerns over the spread of Omicron linger, England will not implement any new COVID-19 restrictions before the end of 2021. The French government said it would tighten measures, though there will be no curfew for New Year's Eve. The blue-chip CAC 40 firmed 0.6%.
The rapid rise of Omicron cases could dampen, if not derail, central banks' plan for policy tightening into the next year, said Varathan at Mizuho Bank.
Shares of Italy's Alerion Clean Energy advanced 4.1% on reports its controlling family could sell a stake of up to 43% in the renewable energy operator in a deal worth around 800 million euros ($905 million).
Swiss specialty chemicals maker Clariant said it would purchase assets from German competitor BASF in North America in a $60 million deal that will help expand its sustainable business. BASF and Clariant shares rose 0.7% and 0.5% respectively.
Spanish telecom group Telefonica rose 0.8% after it reached an agreement with labour unions to cut about 2,700 jobs in early 2022.
Shares in Banca IFIS IF.MI jumped 5.5% after the small Italian bank said its parent company would complete a proposed move of its registered offices to Switzerland in January, lifting IFIS' capital ratios.
($1 = 0.8835 euros)
(Reporting by Susan Mathew and Anisha Sircar in Bengaluru; Editing by Shounak Dasgupta and Pravin Char)