European stocks rallied for a third day as the global mood brightened on easing concerns about cash-strapped developer China Evergrande, while investors awaited the latest batch of business surveys.

The pan-European STOXX 600 index rose 0.6% by 0709 GMT and was now set to end the week with solid gains.

Asian stocks rose after Evergrande's shares surged 30% in Hong Kong markets as its chairman sought to reassure investors after the company's unit said it had "resolved" a coupon payment on an onshore bond.

However, Evergrande's Frankfurt-listed shares tumbled 20.4%.

Early reading of IHS Markit's September business surveys and the Bank of England's monetary policy decision are due later in the day, with investors looking for clues on growth and policy trajectory.

Royal Mail Plc gained 1.5% after it forecast a surge in first-half operating profit as it benefits from improving letter volumes and higher UK parcel revenues.

French car parts company Faurecia rose 3.2% even as it lowered its main 2021 financial targets due to a sharp reduction in worldwide automotive production. Rival Valeo also gained 3%.