(Bloomberg) -- European stocks gained on Wednesday as investors assessed prospects for an interest-rate cut by the European Central Bank next week and more China stimulus.
The Stoxx Europe 600 Index was up 0.7% by the close. Among individual stocks, Continental AG rallied 7.2% after the tiremaker reassured analysts about its earnings outlook. Bayer AG fell after Washington state’s top court said it would review a decision to throw out a $185 million jury award against its Monsanto unit.
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Technology and automakers outperformed, while energy and banks were the biggest underperformers.
The ECB will probably lower rates next week and will loosen monetary policy again at future meetings depending on progress on inflation, Governing Council member Francois Villeroy de Galhau said Wednesday. Investors are now pricing a more than 90% chance of a 25 basis-point rate reduction in October.
European equities hit a record high at the end of September as stimulus measures from Chinese authorities boosted risk sentiment amid a growing conviction that US and euro-area interest rates would fall further in the coming months.
China said it would hold a briefing on fiscal policy on Saturday, as investors look to authorities in Beijing to set out additional measures to boost the world’s second-largest economy.
“What we have traded so far in China is a technical rebound, now the question is whether it will shift to a structural upward trend,” said Jacques Henry, head of cross-asset research at investment firm Silex in Geneva. “A Chinese revival is evidently good for European stocks, since they’re from the most integrated zone.”
Investors are also looking ahead to minutes from the Federal Reserve’s last policy meeting, due out later Wednesday, and fresh US inflation data on Thursday for clues about the pace of further Fed rate cuts.
European shares with a large exposure to China, such as luxury goods and miners, rebounded moderately on Wednesday, clawing back some of their sharp declines from the prior session when China imposed a levy on brandy from the European Union, escalating a trade dispute.
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--With assistance from Sagarika Jaisinghani.
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