European shares gain on China's reopening optimism

European shares climbed on Friday, as optimistic investors gauged the potential impact of a week-long Lunar New Year holidays after China lifted its COVID-19 curbs, even as concerns over global economic slowdown continued to sap sentiment.

The pan-European STOXX 600 climbed 0.3% at 0936 GMT, boosted by gains in banks and industrials.

European shares were on track to snap a two-week winning streak, thanks to the worst single-day selloff so far this month on Thursday following disappointing earnings reports, weak U.S. economic data and hawkish comments from central bankers.

Investors will closely monitor further commentary from Christine Lagarde after the ECB President and fellow policymaker Klaas Knot on Thursday said investors were underestimating the central bank's determination to bring inflation back to its 2% target.

China-exposed luxury stocks such as LVMH and Hermes International rose 0.7% each.

Energy stocks gained 0.8%, tracking firm crude prices on hopes of demand recovery in the world's second-biggest economy. [O/R]

China said the worst was over in its battle against COVID-19, ahead of what is expected to be one of the busiest days of travel in years on Friday - a mass movement of people that has fed fears of a further surge in infections.

"Europe has more exposure to China reopening and luxury is a big part of the European market," said Jamie Mills O'Brien, investment manager at Abrdn.

"Some of the big players are pure China reopening bets."

On the data front, British shoppers unexpectedly cut their spending in December, while German producer prices rose in the last month at a slower rate than in November, in part due to lower energy prices.

Both the German DAX and UK's commodity-heavy FTSE 100 were up 0.4% each.

Spain's IBEX climbed 1.1%, supported by a 7% jump in the shares of Cellnex, after the country's newspaper Okdiario reported American Tower and Brookfield fund are analysing a possible takeover bid for the Spanish mobile phone tower operator.

Shares of Siemens Energy fell 1.4% after slashing its 2023 profit outlook and Sweden's Ericsson fell 5.5% as the networking and telecommunications firm's core earnings missed expectations for the third quarter in a row.

Meanwhile, Sandvik gained 3.1% following better-than-expected fourth-quarter earnings.