European stocks hit two-week highs on China stimulus promise

European stocks

European stocks rose to near two-week highs on Wednesday after China promised to roll out more stimulus to boost its economy, while hopes of progress in Ukraine-Russia peace talks kept the mood buoyant.

The pan-European STOXX 600 index rose 2.2%, hitting its highest since March 3.

Battered stock markets in China and Hong Kong surged after Vice Premier Liu He said Beijing will roll out more measures to boost the Chinese economy as well as favourable policy steps for its capital markets.

Dutch tech investor Prosus , which has a huge stake in China’s Tencent, surged nearly 20% after hitting all-time lows in the previous session. The stock led the wider technology index up nearly 4.7%.

Other China-exposed sectors such as miners and autos were up between 2.1% and 3.2%. Luxury stocks LVMH, Richemont and Hermes, also reliant on China for a large part of their revenue, gained between 4.8% and 7.8%.

“The hope of a turning point in Chinese equities is boosting global stocks and the importance of China to the global economy cannot be understated,” said Roger Jones, head of equities at London & Capital.

Investors also took comfort from Ukrainian President Volodymyr Zelenskiy’s comments on Wednesday that peace talks with Russia were sounding more realistic.

The Ukraine crisis has sent commodity prices soaring, with crude prices breaching $139 a barrel at one point and raising fears of high inflation.

While crude prices are currently trading at $102, investors are worried about aggressive tightening by major central banks to tame inflation.

The U.S. Federal Reserve is widely expected to raise interest rates by 25 basis points when it releases its policy decision at 1800 GMT on Wednesday.

Investors will be looking closely at the updated quarterly economic and interest rate projections, the first concrete guidance about how inflation and the Ukraine crisis has influenced policymakers.

The FTSE MIB rose  by 3.05% to 24,237.20. In the cash markets, the DAX  Germany  rose by 3.15%  to 14,356.65. CAC 40  in France  rose by 3.45% to 6,574.37 while the FTSE 100  in the U.K. was up  by 1.33% to 7,268.35 ,at the time of writing.

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