Portugal Colonial - Stocks rally on tariff relief hopes, German spending plan

Frankfurt surged 3.5 percent in midday deals and German bond yields rose after the likely next chancellor, Friedrich Merz, announced the spending plans in the hope of also reviving Europe's biggest economy.

European defence and manufacturing stocks also jumped while the euro rose sharply against the dollar.

The Paris stock exchange gained 2.1 percent while Milan was up 2.2 percent. London advanced 0.5 percent.

"This is huge," Kathleen Brooks, research director at XTB trading platform said in reaction to the news out of Germany.

"For years, economists have said that Germany needed to change its spending rules to get out of the economic hole. It's taken a Conservative chancellor-in-waiting to pull the trigger," she added.

Investors also reacted to comments from US Commerce Secretary Howard Lutnick, who said that he thought Trump would "work something out" with regards to Canada and Mexico, whose goods were hit with 25 percent levies.

"Markets would take even the slightest rollback from Trump as a positive sign, helping to settle nerves following concerns about a full-blown trade war," said Russ Mould, investment director at investment platform AJ Bell.

Global stocks tumbled Tuesday after US tariffs on China, Mexico and Canada took effect and the three countries retaliated, while fears grew that Europe could be Trump's next target.

- Chinese economy -

Over in Asia, investors welcomed China's economic targets for the coming year and the prospect of tariff relief, with Hong Kong closing up almost three percent.

China set an annual growth target of around five percent and vowed to make domestic demand its main economic driver, as lawmakers attended the annual meeting of the National People's Congress.

Beijing also announced a rare hike in fiscal funding, allowing its budget deficit to reach four percent of its GDP this year.

It comes alongside a pledge to create 12 million new jobs in China's cities and a push for two percent inflation this year.

The world's second-largest economy is also planning to increase defence spending by 7.2 percent, the same as last year.

But observers have tempered expectations for an expected stimulus given that China is facing strong economic headwinds, especially in light of US tariffs.

These include a persistent property sector debt crisis, stubbornly low consumer demand and stuttering employment for young people.

"We remain sceptical that it will be sufficient to prevent growth from slowing this year, said Julian Evans-Pritchard, China analyst at Capital Economics.

"Especially given the headwinds on the external front and the lack of a more pronounced shift in government spending towards support consumption."

Elsewhere Wednesday, the share price of Hong Kong firm CK Hutchison soared more than 20 percent after the company agreed to sell its lucrative Panama Canal ports to a US-led consortium under fierce pressure from Trump.

- Key figures around 1100 GMT -

London - FTSE 100: UP 0.6 percent at 8,807.74 points

Paris - CAC 40: UP 2.1 percent at 8,214.04

Frankfurt - DAX: UP 3.5 percent at 23,097.07

Tokyo - Nikkei 225: UP 0.2 percent at 37,418.24 (close)

Hong Kong - Hang Seng Index: UP 2.8 percent at 23,594.21 (close)

Shanghai - Composite: UP 0.5 percent at 3,341.96 (close)

New York - Dow: DOWN 1.6 percent at 42,520.99 (close)

Euro/dollar: UP at 1.0692 from 1.0485 on Tuesday

Pound/dollar: UP at $1.2825 from $1.2694

Dollar/yen: UP 149.44 from 149.32 yen

Euro/pound: UP at 83.36 pence from 82.60 pence

West Texas Intermediate: DOWN 1.7 percent at $67.12 per barrel

Brent North Sea Crude: DOWN 1.2 percent at $70.20 per barrel

A.Seabra--PC