European shares buoyed by China stimulus hopes

London: European equities rose on Tuesday, following a stronger showing in Asia where the spotlight fell on the possibility of further policy stimulus in China, though trade looked set to be cautious given fears over Spain’s banks.

The FTSEurofirst 300 was up 0.8% at 992.30 at 12:30 pm, having slipped into negative territory by the close on Monday, down 0.1%, on worry about the growing cost to Spain’s public purse of shoring up the country’s lenders.

Mining stocks rose sharply, ahead 2%, on optimism about a potential uptick in demand as investors speculated that China, whose biggest export market is a Europe mired by the debt crisis, may soon launch a stimulus programme to avoid a sharp slowdown.

“Eyes have now turned to China where stimulus by the government is apparently imminent,” said Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets.

“The market continues to be driven by hope, more than by reality. Staying on the sidelines for a bit seems the right strategy,” he said.