A TV cameraman stands in front of a screen showing the foreign exchange rates after the opening ceremony of the 2023 trading year at the Korea Exchange in Seoul, South Korea, Monday, Jan. 2, 2023. AP
The Paris CAC 40 surged 1.9 percent and the Frankfurt DAX jumped more than one percent but London, Wall Street and oil markets were closed for the New Year holiday.
Most Asian stock markets were also shut. Of those that opened, Jakarta was flat while Seoul fell and Mumbai rose.
Wall Street recorded its worst annual drop since 2008 last year while Hong Kong had its biggest drop since 2011 and Tokyo saw its first annual fall since 2018.
Paris and Frankfurt also had their largest annual falls since 2018 while London bucked the trend as it finished almost one percent higher for the year.
Investors were rocked last year by Russia's invasion of Ukraine in late February, soaring inflation and rising interest rates.
Inflation has been fuelled by surging food and energy prices, but European gas prices, which had climbed to a record 345 euros per megawatt hours in March, fell by more than four percent on Monday to 73 euros -- its lowest level since the war started.
Stock market sentiment was buoyed on Monday by a drop in German and French bond yields -- the rate paid by governments to borrow money.
But the head of the International Monetary Fund, Kristalina Georgieva, said in a US television interview aired on Sunday that 2023 will be "tougher than the year we leave behind" for the world economy.
"Why? Because the three big economies, US, EU, China, are all slowing down simultaneously," she told CBS's "Face the Nation" programme.
"We expect one third of the world economy to be in recession," Georgieva said.
'very severely hit'
Although the United States may avoid it, she said half of the 27-nation European Union will be in recession in 2023 as the bloc is "very severely hit" by the Ukraine conflict.
China's economy, which slowed "dramatically" due to its zero-Covid policy in 2022, will likely be at or below global growth for the first time in 40 years.
The new Covid outbreak in China -- where authorities loosened restrictions after a wave of protests -- poses fresh challenges for the world economy.
Key figures around 1645 GMT
Frankfurt - DAX: UP 1.1 percent at 14,069.26 points (close)
Paris - CAC 40: UP 1.9 percent at 6,594.57 (close)
EURO STOXX 50: UP 1.7 percent at 3,856.09
New York - Dow: DOWN 0.2 percent at 33,147.25 (Friday close)
London - FTSE 100: DOWN 0.8 percent at 7,451.74 (Friday close)
Tokyo - Nikkei 225: FLAT at 26,094.50 (Friday close)
Hong Kong - Hang Seng Index: UP 0.2 percent at 19,781.41 (Friday close)
Shanghai - Composite: UP 0.5 percent at 3,089.26 (Friday close)
Euro/dollar: DOWN at $1.0654 from $1.0667 on Thursday
Pound/dollar: DOWN at $1.2049 from $1.2062
Euro/pound: UP at 88.44 pence from 88.40 pence
Dollar/yen: DOWN at 130.77 yen from 132.96 yen
West Texas Intermediate: UP 2.4 percent at $80.26 per barrel (Friday close)
Brent North Sea crude: UP 2.9 percent at $85.91 (Friday close)