European Shares Bolstered by Resource Gains Amid China Stimulus Slump

European shares saw some recovery on Wednesday due to gains in basic resources, despite a slowdown in the rally driven by China's stimulus package. The STOXX 600 index remained flat at 519.33, impacted by mixed movements including gains in luxury stocks and declines in oil and gas sectors.

European shares showed resilience on Wednesday, buoyed by gains in basic resources. This comes even as the previous rally, prompted by China's stimulus package, started to lose steam.

The pan-European STOXX 600 index was stable at 519.33, managing to recoup early losses. In Asia, Chinese stocks extended their rally for a second day, although other markets saw mixed directions.

Sweden's OMXS 30 index nudged up 0.4% following a central bank interest rate cut to 3.25%. Meanwhile, SAP fell 3.6% amid a U.S. price-fixing investigation, dragging the technology sector down by 0.7%.

The oil and gas sector faced a 0.7% decline on concerns over China's stimulus not sufficiently boosting demand. However, basic resources gained 0.2%, with copper prices hitting two-month highs.

Luxury stocks like LVMH and Hermes added support, although France's CAC 40 dipped 0.4% after a strong previous session. Improved consumer confidence in France offset some losses, with employment data expected later in the day.

China's significant stimulus package, announced Tuesday, aimed to revive its pandemic-hit economy, sparking a rally in European equities. However, focus is shifting to the U.S. economy's health, with recent data showing a sharp drop in consumer confidence. Traders anticipate a 60.4% chance of a major rate cut by the U.S. Federal Reserve.

Elias Haddad, senior markets strategist at Brown Brothers Harriman, noted, "Increased stimulus from China and a dovish Fed create a favorable scenario for risk assets. The only risk is if the Eurozone's economic downturn is as severe as indicators suggest, posing a challenge for European equities."

Additionally, Valmet Oyj soared 10.7% after securing a 1 billion euro order from Brazil.

(With inputs from agencies.)