Europe open: Stoxx surges as China stimulus provides a boost

A wide-ranging stimulus package from China's central bank helped drive European shares to a strong start on Tuesday.

The pan-regional Stoxx 600 index was up 0.7% in early deals to 519.94. Germany's DAX and Britain's FTSE 100 both made upbeat starts as well.

China's central bank unveiled a raft of cuts to reserve requirements and lending rates, including for existing home loans, as it tried to stimulate the country’s stagnant economy.

The People’s Bank of China said it would cut the amount of cash that banks must hold as reserves – known as reserve requirement ratios (RRR) – by 50 basis points.

It will also cut a key policy rate by 0.2 percentage points to 1.5%, while interest rates on existing mortgages will also be reduced by 0.5 percentage points on average, said bank governor Pan Gongsheng.

"Asian markets ripped as China announced a series of easing measures designed to stimulate the world’s second-largest economy. The People’s Bank of China has delved into its bag of tricks to try to get growth back to the 5% target, including cuts to interest rates, mortgage rates, and downpayments for house buyers," said Hargreaves Lansdown analyst Matt Britzman.

"This isn’t the central bank going all-in on stimulus, there’s plenty more left in the tank, but It’s a clear sign that it’s not going to sit back and watch growth disappoint."

"Brent oil futures are trading around $74.6 per barrel this morning, recouping losses from previous sessions as traders give supply concerns a slight edge over demand weakness. On the demand side, stimulus from China’s central bank should also act as a small tailwind given the region’s status as the world’s top oil consumer.”

In equity news, the China package provided a lift for miners and luxury goods companies, both major suppliers to the world's second-biggest economy.

Glencore, Anglo American, Rio Tinto and Antofagasta were all higher, while Richemont and Remy Cointreau led the gainers on the luxury front.

Reporting by Frank Prenesti for Sharecast.com