European stocks rally on Ukraine ceasefire hopes

Europe's main stock markets rallied on Wednesday on reports of a ceasefire in Ukraine and renewed prospects of eurozone monetary easing on the eve of a European Central Bank rate decision.

London's benchmark FTSE 100 index soared to 6,898.62 points -- last seen in January 2000 -- as investors also welcomed solid services sector data.

The FTSE closed at 6,873.58 points, up 0.65 percent from Tuesday's close.

Frankfurt's DAX 30 index jumped 1.26 percent to 9,626.49 points and the Paris CAC 40 leapt rose 0.99 percent to 4,421.87 points, as weaker-than-expected data strengthened hopes of ECB stimulus.

Asian markets were cheered overnight by upbeat data from China, which showed the service sector in the world's second-largest economy hit strengthened to its highest level in seven months.

"Better-than-expected services PMI numbers from China, increased hopes that the ECB would act to stimulate the struggling eurozone economy and hopes of a lasting ceasefire between Ukraine and Russia all combined to drive sentiment," said Tony Cross, a market analyst at Trustnet Direct.

But news that Ukraine's Prime Minister Arseniy Yatsenyuk had rejected the ceasefire plan to end months of conflict in the east of the country weighed on Wall Street equities.

In mid-afternoon trading, the Dow Jones Industrial Average had lost earlier gains to edge up 0.07 percent to 17,080.19 points.

The broad-based S&P 500 dipped 0.13 percent at 1,999.73 points, while the tech-rich Nasdaq Composite Index lost 0.64 percent to 4,568.69 points.

- Ceasefire hopes dim -

Ukraine's beleaguered President Petro Poroshenko announced on Wednesday that he and Russia's Vladimir Putin had agreed to a "permanent ceasefire" in the east of the former Soviet country.

But hopes for the deal quickly evaporated when Ukraine's Prime Minister Arseniy Yatsenyuk rejected the plan proposed by Russian President Vladimir Putin as an attempt to deceive the West.

"This latest plan is another attempt to pull the wool over the eyes of the international community ahead of the NATO summit," he said in a statement.

The talk of progress towards a ceasefire had helped the Russian ruble, which recovered as far as 36.6605 to the dollar on Wednesday from a record low of 37.5094 on Monday.

Moscow stocks also soared. The ruble-denominated MICEX index jumped 3.49 percent and the dollar-denominate RTS index leapt 5.20 percent.

The positive sentiment was also buoyed by hopes the ECB may move to stimulate Europe's lagging economy on Thursday, when both it and the Bank of England are due to meet.

"Given the slew of negative economic numbers we've seen out of the eurozone this morning, there's certainly added weight on (ECB President) Mario Draghi to act," said Valutrades analyst Joao Monteiro.

- Eurozone private sector slows -

Eurozone business activity slowed more sharply than previously estimated in August, new data showed.

Markit Economics' Eurozone Composite Purchasing Managers Index (PMI) fell to 52.5 in August from 53.8 in July. That was the lowest level so far this year and weaker than a preliminary estimate of 52.8.

The 50-point line which marks the difference between expansion and shrinkage of the economy.

"Gloomy euro-area macroeconomic numbers (are) now fuelling expectations that Draghi will institute some sort of quantitative easing measures," noted ETX Capital analyst Daniel Sugarman.

In corporate news, shares in Hermes slumped 3.43 percent after rival luxury goods giant LVMH said it had reached an agreement over its contested holding of 23.0 percent of Hermes. LVMH jumped 2.89 percent.

In London currency deals on Wednesday, the euro firmed to $1.3138, up from $1.3132 late in New York on Tuesday, when it had reached a near one-year low at $1.3110 on expectations of ECB stimulus.

The single currency gained to 79.86 pence from 79.74 pence late in New York on Tuesday, while the pound fell to $1.6451 from $1.6469.

Gold meanwhile sank to $1,261.41 per ounce -- the lowest level since mid-June -- as traders were reassured by the ceasefire reports. The safe-haven investment is normally lifted by geopolitical crises.

It later recovered to 1,265.50 per ounce, down from $1,267 on Tuesday on the London Bullion Market.