European stocks rise as central banks pledge easy money

European stocks held near all-time highs on Wednesday as a host of central bank policymakers pledged to keep monetary policy loose despite recent signs of an uptick in inflation. The pan-European STOXX 600 index rose 0.2%, with gains in travel and leisure stocks offsetting losses in banks.

Global stock markets were relieved as US Federal Reserve officials reaffirmed a dovish monetary policy stance after worries about rising inflation led to a bout in market volatility earlier this month.

Similar comments from European Central Bank policymakers, including that it may be too early to discuss tapering of emergency bond purchases, helped equity markets in the region stabilize.

"I think they will be eager not to make the same mistake that they did in the last cycle. In 2011, they pre-emptively hiked rates ahead of the Fed," said Max Kettner, multi-asset strategist at HSBC Global Research.

"That was one reason for slower growth in the eurozone in pretty much the entire cycle." The STOXX 600 hit a record high on Tuesday, after having risen almost 12% this year, helped by strong earnings and optimism over re-opening of economies as the pace of COVID-19 vaccination picks up.

"We've been very risk on for the start of 2021, and we've taken quite a bit of cyclicality off our asset allocation simply because we're missing the next big catalyst on the macro side," Kettner said.

European stocks, however, are set to hold around or inch just above current record levels as the initial boost fades. A Reuters poll of strategists predicted the STOXX 600 would reach 451 points by year end, just 1.3% above Monday's close.

British retailer Marks & Spencer jumped 4.2% to a one-year high after it said it had traded well in the early weeks of the 2021-22 and that earnings would recover after reporting an 88% slump in full-year profit.

French food company Danone slipped 1% after Berenberg downgraded the stock to "sell", citing the hard-to-fix low-growth nature of most of its categories.

Spire Healthcare Group jumped 24.6% after Australian hospital operator Ramsay Health Care said it would buy British peer for 1 billion pounds ($1.42 billion).