Prior to the scheduled Monday meeting with Banca D'Italia, the Italian central bank, markets were advancing. The increase in Chinese industrial demands and expectation on Italian banks' bailout plan have brought European stocks continued last week's gain.

Stoxx Europe 600 increase 0.6%, to regain from 0.8% earlier loss, as investors expected the bailout plan for Italian banks. While China's manufacturers increased their month-on-month prices for the first time since September 2013, which is also boosting iron ore in the commodity sector.

Chief Analyst at Copenhagen's Danske Bank A/S, Allan von Mehren, told Bloomberg that investors expected a recovery and they waited for the sign of recovery for most companies which struggled in the beginning of this year.

"Investors won't find it easy to believe in the rally until they get more evidence of a business-cycle recovery. The good news is that we already know that the beginning of the year was pretty tough for most companies, so the bar has been set pretty low for this earnings season," von Mehren said.

In the European stock market, banking stocks and commodity producers are the highest gainers. Italian lender Intesa Sanpaolo SpA and Spain's Banco Santander SA led the rise. While in the commodity sector Anglo American Plc and ArcelorMittal advanced at least 2.9%.

CNBC reported that Italian banks were trading higher after the nation's largest banks has agreed to meet Treasury and the central bank last Monday. The meeting was set to discuss a detailed bailout plan for the ailing banks which had a huge amount of bad loans.

Italian central bank, Banca d'Italia, had planned to set up a government-backed fund to buy bad loans from the banks. Non-performing loans in Italian banks has acccumulated to the one-fifth of the country's economy, or equal to €359.7 billion ($410.4 billion).

Following the news of the meeting plan, shares of Italian banks move to positive territories. Banca Monte dei Paschi di Siena was higher by 7% while Banco Popolare and Unicredit were also increasing.

Reuters reported that Italy's banking index was up by 4.7%, but it is still suffer from continuous loss since the beginning of this year. Shares of Italian banks have dropped more than 30%, compared to a 9% drop for the broader European market this year.

Therefore, analysts warned investors to remain cautious until the Italian central bank announces detail of the bailout. Team of analysts at UBS wrote, "Reports of a possible system-wide fund announcement this week are promising but we remain cautious until details are announced."

On Monday's trade, Stoxx Europe 600 Index continued last week's gain to increase 0.6%. Financial and commodity sectors are leading the gain after expectation on the bailout program for Italian banks.