European Stocks Surge Amid Interest Rate Speculation

European stocks rose, led by automotive sector gains, following speculation about upcoming interest rate cuts and an awaited U.S. inflation report. The STOXX 600 gained 0.6%, while Germany's DAX rose 1%. Banks lagged, impacted by downgrades. Focus now shifts to fiscal stimulus news from China and ECB policy actions.

European stocks rallied on Wednesday, reversing previous losses as investors turned their attention to anticipated interest rate cuts and a crucial U.S. inflation report scheduled for later this week.

The STOXX 600 index gained 0.6%, bolstered by a strong performance from the automobile sector, which climbed 1.1%. German automotive supplier Continental reported a 7.2% rise, forecasting improved profitability by the third quarter.

Germany's DAX index outpaced the broader market with a 1% gain. However, the banking sector underperformed, with ING plummeting 2.5% after Deutsche Bank downgraded it. Investors are closely watching signals from China's fiscal strategies and the ECB's next moves on interest rate policy.

(With inputs from agencies.)