European stocks surge higher; ECB meeting, Chinese data boost sentiment

investing.com:

Investing.com — European stock markets traded higher Friday, boosted by better-than-expected Chinese economic data as well as optimism that the European Central Bank may be close to peak interest rates.

At 03:35 ET (07:35 GMT), the DAX index in Germany traded 1% higher, the CAC 40 in France climbed 0.7% and the FTSE 100 in the U.K. rose 1.3%.

European stocks have followed the positive lead from Asia after data released earlier Friday showed Chinese industrial production and retail sales grew more than expected in August. 

This followed Thursday’s announcement from the People’s Bank of China that it will cut the reserve requirement ratio for local banks by 25 basis points — its second such cut this year — in order to release more liquidity into the Chinese economy and potentially shore up economic growth. 

This has boosted hopes that the Chinese post-COVID economic recovery is starting to stabilize, which will be positive for many of Europe’s largest companies given the importance of the Chinese export market.

Sentiment has also been boosted by raised hopes that the European Central Bank, as well as the Federal Reserve, is very close to the end of its rate-hiking cycle.

The ECB raised its key interest rate to a record peak on Thursday, but also signaled this will likely be its final move in a more-than year-long fight against stubbornly high inflation.

«We expect this to be the last hike from the ECB in this cycle, but that does not mean the era of tight monetary policy is over,” said Dean Turner, an economist at UBS. “Interest rates are likely to remain at these levels well into next year. Moreover, the ECB will continue to, and may even accelerate, the shrinking of its balance sheet.»

Data released earlier Friday showed