European stocks gain as Chinese inflation data stokes optimism

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European stocks opened higher on Monday as investors welcomed weekend data that showed deflationary pressures in China had eased, raising hopes that the world’s second-largest economy is stabilizing.

Europe’s Stoxx 600 opened 0.8% higher, boosted by gains in the basic materials sector, which often reflects expectations for demand from China.

In Paris, the Cac 40 rose 0.9% and Frankfurt’s Dax rose 0.6%. Inflation data showed consumer prices rose 0.1% in August, compared with deflation in July, and China’s benchmark CSI 300 index rose 0.7%.

But as new home sales in China’s largest city halved in the first week of the month, property stocks fell sharply, with Hong Kong’s Hang Seng Index falling 0.6%.

The Hang Seng Property Index, which measures Hong Kong’s top developers, fell 3.3%, while the mainland property index fell 1.8%.

The downturn in the real estate sector, which typically accounts for more than a quarter of China’s economic activity, prompted authorities this month to relax mortgage down payment requirements.

The latest stimulus measures follow a series of government policies aimed at boosting the country’s real estate sector, stock market and consumer confidence, all of which are struggling to recover after three years of tight pandemic restrictions.

European investors are bracing for a busy week of economic data releases and the European Central Bank’s interest rate decision on Thursday.

While most market participants remain betting that the ECB will keep policy on hold in September, stronger energy prices and hawkish comments from policymakers last week have raised the likelihood of a rate hike to 39%.

Traders are also watching U.S. consumer inflation data on Wednesday for clues on the outlook for interest rates. Contracts tracking Wall Street’s benchmark S&P 500 index rose 0.4%, while contracts tracking the tech-heavy Nasdaq Composite index rose 0.5% before the New York open.

Brent crude rose 0.1% to $90.75 a barrel, near its highest level this year, after OPEC+ producers Russia and Saudi Arabia announced further production cuts last week. U.S. West Texas Intermediate crude oil prices fell 0.2% to $87.08 a barrel.

Amsterdam TTF natural gas futures rose 5% as a strike at an Australian LNG production site continued.