European Markets React to Positive Trends
European stocks rose sharply, following a rally in Asia after China’s central bank announced a series of stimulus measures aimed at boosting economic growth.
The Stoxx Europe 600 Index increased by up to 0.9%, driven by sectors with significant exposure to China, such as mining, luxury goods, and automotive industries. Brent crude oil prices climbed above $74 a barrel, and iron ore prices also rose, positively impacting shares of companies like Rio Tinto Plc and BHP Group Ltd. Meanwhile, US equity futures edged up slightly, and Treasury yields remained stable.
Boost in Risk Appetite
China’s extensive package of monetary stimulus, announced on Tuesday, included lower reserve requirements for banks and over 800 billion yuan (approximately $114 billion) in liquidity support for the stock market. This move propelled Chinese equities to their best performance since July 2020, helping to ease concerns in Europe regarding slowing economic growth.
“These measures clearly show that Beijing recognizes the urgency of enhancing sentiment in the stock and housing markets,” said Siguo Chen, a portfolio manager at RBC BlueBay Asset Management. “In the short term, it will help stabilize the market, but in the long term, we need to see more fiscal support.”
US Federal Reserve Officials Signal Rate Cuts
The stimulus announcement from China coincided with comments from several Federal Reserve officials in the US, who hinted at the possibility of further significant rate cuts. Chicago Fed President Austan Goolsbee noted that as inflation nears the central bank’s target, attention should shift to the labor market, which suggests more rate cuts may occur in the next year. Neel Kashkari of the Minneapolis Fed also mentioned weaknesses in the job market and expressed support for lowering interest rates by another half percentage point by the end of the year.
Traders are now anticipating nearly three-quarters of a point in policy easing by year-end, indicating at least one more major rate cut is likely. Investors are also waiting for data on the Fed’s preferred price index and US personal spending, scheduled for release later this week.
Emerging Markets React Positively
A measure of emerging-market stocks surged by more than 1% following the announcement by Pan Gongsheng, the Governor of the People’s Bank of China.
The measures included a reduction in a key short-term interest rate and plans to lower reserve requirements for banks to their lowest level since 2018, alongside a package aimed at supporting the nation’s struggling property sector.
Related topics:
