European shares edged higher on Monday after making their biggest annual fall since 2008, with trading light due to British markets being shut for a bank holiday and defensive safe haven stocks the main performers on the index.

Utility stocks were the top performers, with E.ON and RWE rising 1.3 per cent and 1.1 per cent respectively.

"It is very low volume, and I think it is going to be a pretty tough year ahead," Mark Priest, senior trader at ETX Capital, said.

"We have had nothing but doom and gloom. Italy has a whole tranche of debt to repay and that could have a significant knock effect for Europe if they do not do well."

By mid-morning, the pan-European FTSEurofirst 300 index of top shares was up 0.2 per cent at 1,003.80 points after recording their biggest annual drop since 2008 on Friday for the last day of the trading year.