By Devik Jain

(Reuters) – European shares rose on Tuesday, led by commodity-linked stocks and automakers after China relaxed its COVID-19 quarantine mandate, with investors eyeing the European Central Bank’s (ECB) annual forum for clues on monetary policies.

The continent-wide STOXX 600 index was up 0.7%, rising for a third straight session amid easing concerns about aggressive central bank policy moves to tame red-hot inflation.

Europe’s oil & gas and mining stocks gained 2.1% and 2.6%, respectively, as commodity prices rallied on hopes of a resurgence in demand from China, the world’s second-biggest economy and top metals consumer. [O/R] [MET/L]

Health authorities said China would halve to seven days its COVID-19 quarantine period for visitors from overseas, with a further three days spent at home.

Shares of luxury retailers LVMH and Richemont, which rely on China for a major part of their revenue, rose 2.6% and 2.0%, respectively.

“The shock in China is starting to basically improve, but we’re still probably four to six months away from understanding if the various economies from U.S., Europe to China are heading for a recession,” said Sebastien Galy, a senior macro strategist at Nordea Asset Management.

“Having said that, some (investing) styles and valuations are getting very attractive. It’s a market picker, a time of greatest rotation in the market and one where managers can bring quite a bit of added value.”

Equity markets have seen a sharp sell-off this year as investors scrambled to adjust their expectations for economic growth and corporate profits in the wake of soaring inflation and interest rate hikes.

With the ECB set to raise rates for the first time in a decade next month, its President Christine Lagarde said they will move gradually but with the option to act decisively on any deterioration in medium-term inflation.

Lagarde and U.S. Federal Reserve Chair Jerome Powell are due to speak at the annual forum on central banking in Sintra, Portugal on Wednesday.

Among other stocks, France’s Valeo gained 3.8% after it won a major contract with BMW to equip the German carmaker’s upcoming electric vehicle platform with advanced driving assistance systems.

UK’s Pennon Group slid 6.4% after the British water regulator opened an enforcement case against the utility company’s South West Water.

(Reporting by Devik Jain in Bengaluru; Editing by Subhranshu Sahu and Uttaresh.V)