Stock indices closed higher as concerns over a slowdown in the Chinese economy eased. The People's Bank of China (PBoC) announced on Tuesday that it lowered the one-year benchmark bank lending rate by 25 basis points to 4.6%. The central bank hopes with this decision to support the country's economy and to calm down the markets.
The interest rate cut would be effective from Wednesday.
One-year benchmark deposit rates were cut by 25 basis point, reserve requirements (RRR) were lowered by 50 basis points to 18% for most big banks.
New reserve requirements would be effective on September 6.
Meanwhile, the economic data from the Eurozone was positive. German business confidence index rose to 108.3 in August from 108.0 in July, beating expectations for a decline to 107.7.
"Satisfaction with the current situation has again increased significantly. However, the companies were somewhat less optimistic regarding future business. The German economy continues to be a rock in turbulent waters," Ifo President Hans-Werner Sinn said.
The Ifo current conditions index climbed to 114.8 from 113.9. Analysts had expected the index to remain unchanged at 113.9.
The Ifo expectations index declined to 102.2 from 102.3. Analysts had expected the index to decrease to 102.0.
Germany's final GDP gained by 0.4% in the second quarter, in line with the preliminary reading, after a 0.3% increase in the first quarter.
The increase was driven by higher exports as the euro remained weak. Exports increased much more than imports.
Household and government consumption expenditure continued to develop positively.
On a yearly basis, Germany's final GDP rose to 1.6% in the second quarter from 1.2% in the first quarter, in line with the preliminary reading.
Indexes on the close:
Name Price Change Change %
FTSE 100 6,081.34 182.47 3.09 %
DAX 10,128.12 479.69 4.97 %
CAC 40 4,564.86 181.40 4.14 %