EU equities rise as China stimulus pledge helps safe stocks

LONDON: European stocks were higher on Tuesday as investors bought consumer staples and other stocks considered safer during economic strife after China pledged more stimulus to stabilise slowing growth in the world's No.2 economy.

The pan-European STOXX 600 was up 0.2 percent at 0946 GMT, recovering from brief early pressure to extend a three-day rally that saw the index hit five-month highs a day earlier amid hopes of a truce to the protracted U.S.-China trade spat.

Tobacco, healthcare and consumer staples, considered havens during political and economic turmoil, led the gains amid broader gloom about the global economy. British American Tobacco , Anheuser Busch and Unilever were up between 1.2 percent and 2.1 percent.

Equities also perked up after euro-zone data showed business activity accelerated more than expected last month, helping offset downbeat news from China.

Chinese Premier Li Keqiang cut the government's 2019 growth target to 6.0-6.5 percent, as expected, and promised more stimulus, including cuts in taxes, increases in infrastructure investment, and lending to small firms.

While the cut underlined the strain that has slowed growth and roiled global markets, stimulus steps reassured investors that Beijing was serious about steadying the economy.

"I think we all saw it coming. The growth trend was going to be cut and they're saying the right things about stimulus. They have plenty of policy levers to pull if needed," said Peel Hunt economics and strategy research analyst Ian Williams.

Still, autos and suppliers, which rely on Chinese demand, were under pressure, with Continental and Daimler among the biggest fallers in Frankfurt.

Later in the day, the U.S. ISM non-manufacturing data will offer an insight into Friday's non-farm payrolls data and is expected to show an improvement on January's data which came during the U.S. government shutdown.

Among individual movers, Evonik shares were close to four-month highs after the German chemicals group reported a slight rise in profits thanks to its coating additives and engineering plastics division.

Vodafone added 2.3 percent after announcing plans to issue 4 billion euros ($4.5 billion) worth of convertible bonds to help finance its takeover of some Liberty assets.

Elsewhere in the UK, British product testing company Intertek was the biggest faller in London, with a dealer attributing the drop to profit taking after largely in line full-year results.

Eurofins fell 6.6 percent to the bottom of the STOXX 600 after the food and biopharma product testing firm said it would curb its M&A activity in a bid to shore up margins and cash flow.

BBA Aviation was on track for its worst day in three months after its full-year results.

Luxury goods companies Richemont and Moncler  were each down more than 3 percent after downgrades.