Europe Markets: European stocks bounce back as investors watch U.S.-China trade talks

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European stocks rose late-morning Wednesday, despite rising tensions between the U.S. and China on the eve of the start of high-level trade talks that are scheduled to start in Washington, D.C.

Recent reports have that Beijing was open to a “partial trade deal” and that it would aim to increase U.S. agricultural purchases, also helped to deliver a fillip to most European indexes.

The Stoxx 600 SXXP, +0.44% edged up 0.7%, while the German DAX DAX, +0.98% rose 1.3% and the France’s CAC PX1, +0.71% lifted 1%.

The FTSE 100 UKX, +0.54%, meanwhile, gained 0.6%, as the pound GBPUSD, +0.0327%  recovered.

What’s moving the markets?

European stocks closed lower on Tuesday as hopes of a positive outcome from this week’s U.S.-China trade talks faded.

After blacklisting a group of Chinese tech companies over alleged human rights abuses against China’s Muslim minority groups, the U.S. followed up by imposing visa restrictions on a number of Chinese officials.

However, market participants may be taking the recent reports of China’s openness to a partial trade deal as a positive step in a week of rising tensions.

Chinese officials could also offer to increase annual purchases of U.S. agricultural products by $10 billion a year when negotiations resume tomorrow, the Financial Times (paywall) reported.

Stocks clawed back some of this week’s losses on Wednesday as cautious optimism returned.

Federal Reserve Chairman Jerome Powell kept the door open for further rate cuts on Tuesday, saying the central bank will act will act “as appropriate to support continued growth.”

Powell also said the Fed was contemplating buying shorter-term Treasury bills.

“This rise in geopolitical tensions has unsurprisingly seen markets in the U.S. and Asia come under pressure, though these nerves don’t appear to have translated into a weaker start for markets in Europe which have opened a little bit firmer,” wrote Michael Hewson, chief market analyst at CMC Markets, in a daily research note.

“In a more positive development Fed chairman Jay Powell announced that the Federal Reserve would soon resume the purchase of short term treasury bonds in the hope that it will stabilize the move in short term rates that has been a hallmark of the last few weeks.”

Meanwhile, British Prime Minister Boris Johnson is set to meet his Irish counterpart Leo Varadkar later on Wednesday in a bid to force a breakthrough ahead of an Oct. 31 deadline for Britain to exit from the European Union.

Which stocks are active?

Gambling group GVC Holdings GVC, +3.31% climbed 3.9% after the Ladbrokes owner raised its full-year earnings guidance. Online gambling revenue rose 12% in the third quarter and its U.K. high street betting shops performed better expected amid tighter regulation. It also welcomed an “encouraging start” in the U.S. following its launch of the BetMGM app in New Jersey.

Dutch-food delivery service TKWY, +0.36% rose 1.3% after reporting an 87% increase in orders in the third quarter. It also said progress was being made on its merger with London-listed rival Just Eat.