Europe close: Stocks surge on hopes for Ukraine-Russia talks

European stocks surged on Wednesday and finished near their best levels of the session on hopes that peace talks to end the Ukraine war would succeed, even as investors also eyed a meeting of the US Federal Reserve for an interest rate rise.

The pan-European Stoxx 600 index was up 3.1% at 448.45 with Germany's DAX climbing 3.76% to 14,440.74 and France's CAC 40 3.68% higher to 6,588.64.

Asian shares rebounded overnight from Tuesday’s sell-off, with Hong Kong’s Hang Seng surging 9%, as China’s Vice Premier Liu He said Beijing will roll out more measures to boost the Chinese economy as well as favourable policy steps for capital markets.

"China stimulus headlines and Ukraine deal reports will always give stocks a lift, and to get them both on the same day has meant risk appetite has surged in impressive style," IG chief market analyst, Chris Beauchamp, said.

Ukrainian president Volodymyr Zelenskyy, said there was room for compromise in talks with Russia ahead of a fresh round of discussions, despite more shelling by Moscow’s of Kyiv.

"The meetings continue, and, I am informed, the positions during the negotiations already sound more realistic. But time is still needed for the decisions to be in the interests of Ukraine," Zelenskiy said in a video address early on Wednesday.

The Financial Times would later report that Kyiv and Moscow had drawn up a 15-point peace plan which included a cease-fire, the exit of Russian troops from Ukraine, Kyiv foreswearing any future bid to join NATO and declaring itself neutral.

On the economic front, the focus was on the Federal Reserve meeting later today where an interest rate hike was expected.

“Should this fail to materialise, further volatility across European and the UK market should be expected. It’s also worth keeping in mind the Russian invasion of Ukraine means the frequency and extent of rate rises may not be as high as previously predicted,” said Hargreaves Lansdown analyst Sophie Lund-Yates.

In equity news, shares in cyber security firm Avast slumped 13.3% as the firm’s takeover by rival NortonLifeLock faced a competition probe.

Sweden-based private equity fund EQT jumped 12% after it said it had agreed to buy investment firm Baring Private Equity Asia in a deal worth €6.8bn.

Dutch tech investor Prosus, which has stake in China's Tencent, rebounded 24% after hitting all-time lows in the previous session.