Europe close: Shares close higher as US rally continues on rate hopes

European shares closed higher on Wednesday as US shares continued to rally amid hopes the US Federal Reserve will start to cut rates earlier in the new year.

The pan-European Stoxx 600 ended the session up 0.21% at 478.62, with major regional bourses all higher in the final trading week of the year.

Miners gained after data showed manufacturing activity in China improved last month. Industrial profits experienced a substantial boost in November, with a double-digit increase of 29.5%, following a much more modest 2.7% rise in October.

The surge in profits was primarily fuelled by an overall improvement in the manufacturing sector and a notable upswing in industrial output during the same month.

"There are hopes of a soft landing for the US as inflationary forces slow, borrowing costs are forecast to drop and consumers remain resilient. There are also expectations that authorities in China will move to stimulate the economy through lower borrowing costs next year," said Hargreaves Lansdown analyst Susannah Streeter.

"Mining stocks are among the biggest gainers in early trade as investors assess the potential knock-on effects to demand for metals and minerals if growth is more robust in 2024."

"The breaks aren’t yet being applied to the Santa rally, as investors eye up interest rate cuts as early as March in the US. However, the full effect of painful borrowing costs has yet to be felt, and given the other challenges facing nations next year, from climate change and debt management, pessimism still risks creeping back in."

In equity news, Vestas shares climbed 4.5% after the Danish wind turbine maker won a major order in Australia. Sector peer Siemens Energy gained on the news.

Bayer rose after the German chemicals company said it had won a trial in a lawsuit brought by a California man who said he developed cancer from exposure to its Roundup weedkiller.

Shares in Danish shipping giant Moeller-Maersk fell as the company said it was resuming routes through the Red Sea and Suez Canal, prompting worries among traders that shipping rates would fall. German rival Hapag-Lloyd was also down, although the company said it would be avoiding the region after recent attacks by Yemeni Houthi rebels on commercial vessels.

Reporting by Frank Prenesti for Sharecast.com