Sep 27 2024: European stock markets hit record highs during mid-morning trading on Friday, driven by a strong rally in Asia fueled by China’s economic measures.
As of 05:13 ET (09:13 GMT), the pan-European Stoxx 600 gained 0.3%, reaching 526.92 after earlier peaking at 526.51.
Germany’s DAX index rose by 0.6%, while France’s CAC 40 and the U.K.’s FTSE 100 both increased by 0.3%.
Further Chinese Stimulus Measures Anticipated
China’s central bank reduced interest rates and injected additional liquidity into the banking sector on Friday, as part of ongoing efforts to support its slowing economy and meet a growth target of around 5% this year.
These steps, following a stimulus package announced earlier this week, are expected to be introduced ahead of a week-long holiday beginning October 1, according to a Reuters report. The news outlet noted that a recent meeting of China’s Communist Party leadership highlighted concerns about the health of the world’s second-largest economy.
Reuters sources also revealed that cities like Shanghai and Shenzhen plan to ease major home buying restrictions in the near future. Additionally, Chinese authorities are considering issuing a special sovereign bond worth approximately 2 trillion yuan ($284.43 billion).
If these measures go forward, they could boost China’s gross domestic product by about 0.4% next year, according to Capital Economics analysts.
The potential for increased stimulus led to the best week for Chinese stocks since 2008. The positive sentiment also lifted European luxury stocks, which depend heavily on Chinese consumers. High-end fashion brands such as LVMH, Kering, Hermes, Hugo Boss, and Burberry saw gains, as did automotive stocks.
Moncler shares received an extra boost following news that LVMH had agreed to take up to a 22% stake in the investment company controlling the Italian luxury outerwear brand.
Inflation in France and Spain Declines; U.S. Data in Focus
In September, inflation in both France and Spain decreased more than expected, heightening expectations for another interest rate cut by the European Central Bank next month.
France’s annual consumer price growth slowed to 1.2%, down from 1.8% in August, below the predicted 1.6%. Similarly, Spain’s inflation cooled to 1.5%, falling from 2.3%, lower than the expected 1.9%.
Investors are now closely watching upcoming U.S. personal spending and inflation data, which could offer insight into the state of the U.S. economy as the Federal Reserve prepares for potential rate cuts later this year. The Fed recently lowered interest rates by a significant 50 basis points.
Personal spending, which makes up more than two-thirds of U.S. economic activity, is forecasted to have grown by 0.3% in August, slowing from the 0.5% increase in July.
Meanwhile, the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, is expected to rise by 0.2% for August, consistent with July’s pace. The annual reading is projected to slow to 2.3% from 2.5%.
