European stocks advanced on Tuesday following China's introduction of extensive stimulus measures, including reductions to its benchmark interest rate, aimed at steering the economy away from deflation and towards the government's growth objectives.
However, initial gains were tempered after a survey indicated a continued decline in German business morale for the fourth consecutive month in September, amplifying concerns that the euro zone's largest economy might have entered a recession.
The pan-European STOXX 600 index increased by 0.6% to 519.58, building on a 0.4% rise on Monday despite weak business activity data from both the euro zone and the UK. Specifically, Germany's DAX rose by 0.6%, France's CAC 40 surged by 1.4%, and the UK's FTSE 100 edged up by 0.3%.
The British pound strengthened further against other major currencies following comments from Bank of England (BoE) Governor Andrew Bailey, who stated he does not anticipate a return to low interest rates. Bailey expressed optimism about the downward trajectory of inflation, suggesting that interest rates would decrease gradually.
In corporate developments, shares of Dulux paint manufacturer AkzoNobel climbed approximately 1% after announcing plans to reduce its global workforce by 2,000. Mining companies Anglo American, Antofagasta, and Glencore saw significant gains of 5-7% as copper prices reached a two-month high, buoyed by China's stimulus.
Luxury brands with significant exposure to China, such as LVMH, Kering, and Hermes International, experienced robust growth of 4-5% in Paris. Energy giant BP Plc gained 1%, while Shell added 0.5% amid rising oil prices fueled by increasing Middle East tensions and a weakening dollar.
Smiths Group, an engineering firm, saw its shares slump by 7.4% following FY24 results that fell short of expectations. Building materials provider CRH dropped 1% after announcing a new CEO.
Conversely, Johnson Matthey, a chemicals and sustainable technologies company, rallied 2.1% after revealing that the second tranche of its share buyback program, up to £125 million, would commence today. TotalEnergies advanced 1.4% after signing a Heads of Agreement (HoA) with South Korea's HD Hyundai Chemical to supply 200,000 tons of LNG annually for seven years starting from 2027.
German wind turbine manufacturer Nordex SE increased by 1.5% after being selected to supply and install 41 turbines for a 147.6-MW wind project in Poland. Travel company TUI AG rose by 0.5% after reaffirming its full-year earnings guidance.
