European Stocks Rise as China Measures, UK Inflation Lift Mood

European stocks rose on Tuesday as China’s measures to bolster its economy and supportive UK inflation figures boosted investor risk appetite.

(Bloomberg) — European stocks rose on Tuesday as China’s measures to bolster its economy and supportive UK inflation figures boosted investor risk appetite.

The Stoxx 600 Index was up 0.6% by 11:54 a.m. London time, with all sectors in the green. Miners and telecoms led gains. A Bloomberg report that China’s biggest state-owned banks are weighing further cuts to deposit rates helped sentiment, following on from weekend stimulus measures.

The UK’s FTSE 100 index was also buoyant following Monday’s holiday, gaining 1.5%. Figures showing that food inflation in Britain cooled to lowest level in almost a year in August lifted domestic stock like Ocado Group Plc.

Among individual stocks, Dutch insurer NN Group NV jumped as analysts were positive on its results against a tough macroeconomic backdrop, and distribution and services group Bunzl Plc gained after its first-half earnings beat estimates.

European equities have trimmed this year’s gains in August amid worries over higher-for-longer interest rates and a crisis in China’s property market. The cyclical mining and auto industries have seen the biggest losses so far this month.

JPMorgan strategist Mislav Matejka wrote in a note that sectors as autos, capital goods, retail and banks, which are more dependent on the economic cycle, “can show another leg lower” as he also expects bond yields to retreat.

Questions still remain regarding the path of central bank policy, with investors keeping an eye out for consumer confidence data from the US due on Tuesday, as well as euro-area inflation and China’s PMI numbers later this week.

“This week, markets will look for clues on the ECB and Fed’s next moves,” said Susana Cruz, a strategist at Liberum Capital. “We have preliminary CPI readings in Europe and labour data from the US, which could support a dovish case for both in the coming meetings. With the Eurozone heading towards recession, it seems increasingly likely that a dovish case will realize in September and cuts might happen sooner than it is currently expected.”

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–With assistance from Farah Elbahrawy.

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