The European stocks have gained some momentum during Thursday`s session, as the stocks are linked to China`s economy, where the luxury goods companies and miners remain the top gainers. So, these gains are the results of news where it stated that there are significant economic stimulus strategies being applied by China. In addition, chip stocks have also experienced well-sharp gains, which are influenced by a strong revenue prediction from a United States Micron, which is a semiconductor company, while it further boosts up the market outlook.
The pan-European STOXX 600 index has ended its session with a high of 1.3 percent at 535.61 points, which is also recorded as the new all-time high closing of this index. This indicates that the index has ended its trading day on a higher note. Additionally, it is very close by 0.2 percent to crossing the intraday record high.
The leaders of China are now determined to use necessary fiscal spending to achieve the anticipated growth data of 5 percent in the year 2024. This indicates that the government is ready to increase public spending if it is beneficial for economic growth. The government of China has also recognised newly built challenges that the country is facing, due to which the market expectations were gradually raised that the additional stimulus strategies might be deployed soon, as these are the necessary factors that can be beneficial for the growth and its stability.
The managing director and the head of macro strategy for EMEA at State Street Global Market (SSGM), Mr. Tim Graf, have stated that the current market sentiment toward China`s stimulus measures is very positive at this point, but as time goes on, this positive approach might start to decline. He stated that the underlying issues, which are directly linked to the Chinese demand, are complicated, and this might take some time to get normal. This statement stated that there is a high chance that the current market boost is not going to last on a long-term basis.
Due to China`s stimulus efforts, the current market has experienced a relief, while it also emphasises that the processes might take a little more time to resolve the issues, and the current phase of growth of the market might not last for a longer period of time.
The luxury firms that are directly linked with China, such as LVMH and Hernes, have experienced a rise in their stock prices of around 9 percent, respectively. This is fuelled up by the optimism surrounding China`s economic stimulus efforts. However, a broader index has indicated Europe`s top 10 luxury firms have witnessed a rise of 6.5 percent, while mining stocks have also been up by 4.3 percent, which is influenced by the higher base metal prices. This might be boosted by the increased demand from Chinese consumers.
The technological sector of Europe has surged by 3 percent, in which the semiconductor stocks are the primary contributors. This surge in stocks comes after an optimistic revenue-based prediction made by the United States-based company Micron Technology. The expectations were increased by the strong demand for the chips, which are necessary for the development of the applications that are based on artificial intelligence (AI). The positive approach on the basis of AI-related growth has increased the investors’ confidence in the semiconductor sector.
In Switzerland, the central bank has reduced their rate of interest by around 25 basis points, which is due to the current moves shown by the European Central Bank (ECB) and the United States Federal Reserve willing to cut the cost of borrowings. The rate cuts are part of the efforts that are made to cool inflation. The central bank has indicated that there is a high chance of another rate deduction in the near future. This is a result of the actions, the Swiss stock market index has ended its session (SSMI) at a high of 1.4 percent, which also indicates investor optimism about a declining cost of borrowings and the recovering economic conditions.
The ECB policymakers are expecting a rate deduction next month as a result of the disappointing economic data, but they are facing opposition from the conservative members as per the reports of the seven Reuters sources. On the other hand, the Deutsche Bank is expecting a fast decline in the interest rate cut cycle, which starts from the back to back quarter point cuts from the month of December, while it is reported that the Swatch Group`s shares have also increased by 12.1 percent.
The shares of Commerzbank have increased by 6.9 percent after informing a strategy plan for the year 2027 and a target payout ratio above 90 percent during the years 2025 to 2027, while the H&M shares fell by around 4.6 percent, which is against their anticipated target.
Link: https://www.reuters.com/markets/europe/china-rally-pushes-stoxx-600-close-record-highs-2024-09-26/
