On Wednesday, European stocks rose significantly. The pan-European STOXX 600 index added 2.2%, hitting its highest level since March 3. This exponential growth was driven by the reports that China planned to roll out more stimulus to boost its economy. Although traders expressed concern about the rise in COVID-19 cases and lockouts in China, the latest news was positive for markets. China's economy is closely related to the global economy. Therefore, the rising Chinese stock market will benefit stocks in other countries. Shares of Dutch technology investor Prosus, which owns a significant stake in China's Tencent, jumped 20% amid this news. However, they hit all-time lows in the previous trading session.
On average, sectors totally dependent on China's economy such as mining companies and automakers rose by 2.1-3.2%. Sweden-based private equity fund EQT surged by 7.9% after its management announced it had decided to purchase the investment company Baring Private Equity Asia in a deal worth 6.8 billion euros (or $7.5 billion). Stocks of German automaker BMW rose by 2.4% despite lowering its profit expectations for its automotive segment for 2022 profitability due to the Ukraine crisis.
Zara Inditex is one of the world's largest distribution groups in the fashion industry. It gained 0.8% after management reported that its net income more than doubled in 2021 after its sales recovered from the COVID-19 pandemic.
Shares of luxury companies also showed significant growth, gaining between 4.8% and 7.8%. For example, French multinational corporation LVMH which manufactures luxury goods with brand names Christian Dior, Louis Vuitton, Givenchy, Guerlain, Hennessy, Chaumet, etc., Shares of Swiss holding company Richemont, which produces luxury goods, went up. French fashion house Hermes was also included in the top of rising shares. It is evident that these luxury goods manufacturers benefited from the news about the stimulation of the Chinese economy as they become reliant on China for a large part of their revenue.
Apart from optimism about rising China's stock market, investors are focusing on Ukraine. On Wednesday, Ukrainian president Volodymyr Zelensky said that peace talks with Russia were sounding more realistic. Notably, Russia's military operation in Ukraine caused a sharp rise in commodity prices. For example, oil breached $139 a barrel at one point, raising fears of high inflation.
Moreover, investors are worried about aggressive tightening of monetary policy by major central banks to curb inflation. The US Federal Reserve is widely expected to raise interest rates by 25 basis points when it releases its policy decision at 18:00 GMT on Wednesday.
