European equities rallied on Wednesday after a senior Chinese official indicated Beijing would step in to boost the world’s second-largest economy, soothing market jitters caused by the war in Ukraine and an anticipated US interest rate rise.

The regional Stoxx 600 share index opened almost 2 per cent higher, though it remained 9 per cent lower for the year as European markets remained depressed on concerns that Russia’s invasion of Ukraine and an associated surge in energy prices would tip the region into another recession.

Germany’s Xetra Dax added 2.2 per cent, but remained more than a tenth lower year to date, while London’s FTSE 100 added 1.2 per cent on Wednesday.

The moves came after Liu He, Chinese president Xi Jinping’s closest economic adviser, said the government would take measures to “boost the economy in the first quarter”, as well as introduce “policies that are favourable to the market”.

China’s economy continues to be affected by the nation’s zero-coronavirus policies, which have led to widespread social restrictions and trade disruptions. Shanghai and Shenzhen, two key commerce hubs, are in partial lockdown while Chinese manufacturers and consumers have been affected by western sanctions against Russia pushing up prices of energy, metals and agricultural commodities.

In Asia, Hong Kong’s Hang Seng index was on track to close 9 per cent higher as markets across the Asia-Pacific region rallied in response to expectations of market-boosting measures from Beijing. The CSI 300 index of mainland Chinese shares rose 4.3 per cent and the Nikkei 225 in Tokyo closed 1.6 per cent higher.

Elsewhere in markets, government bond prices softened ahead of a monetary policy decision by the Federal Reserve. The US central bank is expected to raise interest rates for the first time since tethering borrowing costs close to zero in March 2020. The annual pace of consumer price inflation in the US hit a fresh 40-year high of 7.9 per cent in February.

Bank of America strategists said they expected the Fed to raise its main funds rate by a quarter point at the meeting, while signalling they were willing to go further.

“We expect a hawkish message,” from Fed chair Jay Powell,” the BofA team said in a note to clients, “who will likely reiterate that the Fed needs to get serious about price stability, though we think he will flag risks to the outlook from the Russia-Ukraine conflict and higher commodity prices”.

The benchmark 10-year Treasury yield, which moves inversely to the price of the US debt security and underpins borrowing costs worldwide, added 0.03 percentage points to 2.2 per cent.

Traders also expect a Fed rate rise to strengthen the resolve of other global rate-setters, such as the European Central Bank, to do the same.

The yield on Germany’s 10-year Bund, a barometer for borrowing costs in the euro area, rose 0.05 percentage points to 0.38 per cent, close to its highest since 2018.