European stocks ended higher in their first trading session of the year on Monday, led by defensive utilities such as E.ON and GDF Suez , while volumes were anaemic as UK and U.S. markets remained closed for the New Year holiday.

The FTSEurofirst 300 <.FTEU3> index of top European shares provisionally closed 1 percent higher at 1,011.14 points, the index's highest close in two months, with investors shrugging off gloomy data from the euro zone showing the region's manufacturing activity declining for a fifth straight month in December.

A number of traders and analysts, however, warned about the risk of hangover from the brisk two-week Christmas rally when most investors come back to work later in the week.

The odds for a post-party headache will indeed be high, Saxo Bank trading advisor Didier Abbato said. The bad news is that Santa did not deliver on a quick fix solution to Europe's financial troubles.

The STOXX 600 utility index <.SX6P>, one of the worst performers among European sectors in 2011 with a loss of 17 percent for the year, paced the gains on Monday, up 2.2 percent,

with E.ON up 4.2 percent and GDF Suez up 2.9 percent.

(Reporting by Blaise Robinson, Editing by Caroline Jacobs)