PARIS: European stocks climbed on Thursday boosted by hopes of a breakthrough in the US debt ceiling stand-off, with Germany’s blue-chip index hitting its highest level in more than a year.

The continent-wide STOXX 600 index closed 0.4% higher, with automobiles and technology stocks leading the buying spree.

Germany’s blue-chip DAX rallied 1.3% to its strongest since January 2022, while France’s CAC 40 jumped 0.6% to an over two-week high and Italy’s FTSE MIB rose 0.1% to a three-week peak.

A media report said House Speaker Kevin McCarthy is optimistic congressional negotiators could reach a deal to raise or suspend the debt ceiling in time to hold a House vote on it next week.

“There’s a bit of a relief wave rippling around financial markets that there will be an agreement reached,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“The eventuality of a seismic shock to the financial system retreating considerably has supported stocks today.” The main European stocks benchmarks have been largely rangebound this month as investors weighed the risks of further monetary policy tightening by the European Central Bank (ECB) and of a US recession.

The ECB will have to keep raising interest rates to bring inflation back to its 2% goal, though most of the tightening has already been done, the central bank’s Vice President Luis de Guindos noted.

On Wednesday, data showed Euro zone inflation accelerated last month with overall price growth rising to 7% in April from 6.9% a month earlier. Markets anticipate the ECB’s 3.25% deposit rate rising to just below 3.75% over the coming months, but some policymakers have said this may not be enough.