By Sara Sjolin, MarketWatch

Italian government late Monday said it is preparing for a EUR20 billion rescue of country's banking system

European stock markets moved mostly higher on Tuesday, with Italian banks among the biggest gainers after news the country's government is preparing a bailout package for struggling lenders.

The Stoxx Europe 600 index rose 0.5% to 361.32, closing at its highest level since December last year.

Read:When are European markets closed for Christmas and New Year's holidays? (http://www.marketwatch.com/story/when-are-european-markets-closed-for-christmas-and-new-years-holidays-2016-12-19)

The pan-European index appeared toshake off the latest terror events in Berlin, Zurich and Ankara on Monday. In Berlin, 12 people were killed after a truck plowed into crowds at a Christmas market (http://www.marketwatch.com/story/probable-terror-attack-in-berlin-police-question-pakistani-suspect-in-12-deaths-2016-12-20), while in Ankara an off-duty policeman shot dead the Russian envoy (http://www.marketwatch.com/story/russian-ambassador-to-turkey-is-shot-2016-12-19-12103737) to Turkey. In Zurich, three people were injured after a shooting at an Islamic center.

"The fact that the region posted any growth [in stock markets] this morning is somewhat remarkable given the events in Germany and Turkey on Monday--it is perhaps a sign of how depressingly routine such tragedies have become that the market no longer has the same kind of reaction to them," said Connor Campbell, financial analyst at Spreadex, in a note.

Italian rescue: On Monday, European stock markets closed loweras a recent rally in banks paused for breath. However, on Tuesday, the banks swung higher again with Italian lenders in particular helping lift the Stoxx Europe 600 Banks Index 1.1%. The banking benchmark has is still off 0.9% year to date.

The gains came as the Italian government late Monday said it is preparing for a potential EUR20 billion rescue package for the country's ailing banking system, including embattled Banca Monte dei Paschi di Siena SpA (BMPS.MI).

Unione di Banche Italiane SpA (UBI.MI) jumped 5.8%, Banco Popolare SC (BP.MI) added 4.3% and Banca Popolare di Milano Scarl (PMI.MI) climbed 4.3%.

BMPS shares, however, erased earlier gains and ended 0.4% lower.

Italy's FTSE MIB index rose 1.5% to 19,247.24, outperforming other major European stock benchmarks.

Indexes: Germany's DAX 30 index climbed 0.3% to 11.464.74, while France's CAC 40 index gained 0.6% to 4,849.89.

The U.K.'s FTSE 100 index ended 0.4% higherat 7,043.96 (http://www.marketwatch.com/story/ftse-100-tilts-lower-but-travel-stocks-shrug-off-terror-attacks-2016-12-20).

Movers: Shares of Total SA (TOT) (TOT) added 0.8% after the French oil major said it has acquired 23% of Tellurian Investments Inc (http://www.marketwatch.com/story/total-to-buy-23-of-tellurian-at-585-per-share-2016-12-20). to develop an integrated gas project.

Novartis AG (NOVN.EB) put on 0.3% after the Swiss drugmaker late Monday said it has entered into a collaboration and license agreement with Conatus Pharmaceuticals Inc (http://www.marketwatch.com/story/conatus-shares-skyrocket-after-novartis-license-deal-2016-12-19).(CNAT) to develop new oral treatments for chronic liver diseases.

Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) closed up 2.2% after the company said it's buying MBNA Ltd (http://www.marketwatch.com/story/lloyds-buys-b-of-as-uk-mbna-unit-for-24-bln-2016-12-20-44852648)., the U.K. credit-card business of Bank of America Corp. (BAC), for GBP1.9 billion ($2.35 billion), as part of its plan to expand its consumer-finance business.

Economic news: Producer prices in Germany rose 0.1% (http://www.marketwatch.com/story/german-producer-prices-rise-faster-than-seen-2016-12-20) in November year-over-year, beating forecasts of a 0.2% fall.

"While German producer price data do not normally catch attention, the November figures released this morning were worthy of note, illustrating the shifts in underlying trends that will push CPI significantly higher over the near term," economists at Daiwa Capital Markets said in a note.

The eurozone's current-account surplus widened in October (http://www.marketwatch.com/story/eurozone-current-account-surplus-widens-in-october-2016-12-20-44852723) from September, data from the European Central Bank showed on Tuesday.

(END) Dow Jones Newswires

December 20, 2016 12:18 ET (17:18 GMT)

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