STOCK MARKETS in Europe have opened in positive territory this morning following the lead of Asian markets, which rallied amid suggestions that China will shift its economic policy back towards heavy growth.

Markets in London, Paris and Frankfurt are all up by over 0.5 per cent, while Italy’s MIB index is up by 1.75 per cent as lunch hour approaches in Milan.

In Dublin, the ISEQ index was up by 0.6 per cent shortly before 11am.

In Asia, Japan’s Nikkei 225 index rose 1 per cent, while Hong Kong’s Hang Seng added 0.8 per cent and South Korea’s Kospi climbed 1.4 per cent.

Investors were encouraged by weekend statements from Chinese Premier Wen Jiabao, who promised to spur growth in the world’s second-largest economy, a shift from previous rhetoric about curbing inflation.

Gains on Wall Street after a week in the doldrums also lifted sentiment.

Renewed efforts to prevent nearly bankrupt Greece from sliding into default and exiting the euro currency union have also provided a slight relief to traders.

A weekend summit in Washington of leaders of the world’s major advanced economies provided little in the way of tangible results. But the G-8 countries issued a statement affirming their desire for Greece to remain in the euro, raising hopes of decisive action to prevent an exit.

It’s further reported this morning that Greece’s four major commercial banks will receive €18 billion in recapitalisation funds from the country’s interim government later this week, which will enable those banks to resume routine borrowing from the ECB.

“There was nothing to really initiate a bounce, but there were no new negatives out of that either,” said Benjamin Collett, head of Japanese equities at Louis Capital Markets in Hong Kong.

Additional reporting by AP