European stocks rose, on track for their biggest one-day gain this year, benefiting from a drop in bond yields and a Bloomberg News report that China is considering a fresh round of stimulus for its economy.
(Bloomberg) — European stocks rose, on track for their biggest one-day gain this year, benefiting from a drop in bond yields and a Bloomberg News report that China is considering a fresh round of stimulus for its economy.
The Stoxx Europe 600 Index was up 1.6% by 12:48 p.m. in London. Gains were led by the basic resources and autos subindexes, which rallied after a report that Beijing is mulling raising its budget deficit for 2023 and issuing additional debt for infrastructure projects. Luxury companies, including LVMH and Hermes International also rose, with the former due to report third-quarter sales after close of trade on Tuesday.
Appetite for equities was also lifted by comments from Federal Reserve officials, who hinted Monday that further interest rate rises may not be needed. US 10-year Treasury yields slid the most since March after the comments.
Among individual European movers, EasyJet Plc shares gained following comments in French newspaper Les Echos from its chief executive officer that the airline was benefiting from a resurgence in travel demand. Ubisoft Entertainment SA fell following a video game delay.
However, European equities are little-changed this month, pressured by risks from the Middle East conflict and the continued impact of high intetest rates.
Frédérique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia, said that while European equity valuations are looking attractive following six months of underperformance, the weaker backdrop is a concern.
“Despite this very attractive valuation, we continue to recommend an underweight for European equities because we think that this weakening of the macro environment is not yet reflected in earnings, which are at risk of headwinds and downgrades,” Carrier said. “And that would really limit the region’s ability to outperform.”
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–With assistance from Sagarika Jaisinghani.
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