Key Points
- European and Asian stocks surged due to Chinese stimulus and oil price drops.
- China plans to issue 2 trillion yuan in sovereign bonds to stimulate the economy. Oil prices fell by 2% as Saudi Arabia signaled increased output.
- The Swiss National Bank cut interest rates, while the European Central Bank faces internal debate over a potential rate cut.
- Investors are awaiting guidance from Federal Reserve policymakers ahead of inflation data.
European and Asian equities surged on Thursday, bolstered by China’s announcement of aggressive economic stimulus and a drop in oil prices as Saudi Arabia signaled a potential shift in its crude pricing strategy. Europe’s Stoxx 600 index rose over 1%, nearing its all-time high from August, while Chinese onshore blue-chip stocks and Hong Kong’s Hang Seng Index climbed by over 4%.
An official statement from China’s politburo revealed that the government plans to deploy additional fiscal spending to meet its 5% annual economic growth target. This raised market hopes for further stimulus, complementing recent rate cuts and macroeconomic measures. Reports also indicated China’s intention to issue special sovereign bonds worth 2 trillion yuan ($284 billion) to stimulate consumption.
Meanwhile, oil prices dropped, with Brent and U.S. crude futures falling by over 2%. This decline followed a Financial Times report suggesting that Saudi Arabia is preparing to abandon its unofficial $100 per barrel target for crude oil, signaling an upcoming increase in output. As a result, European energy stocks dropped by nearly 3%.
In banking, Commerzbank shares reached their highest levels since 2011, climbing 5.5% after news of impending merger talks with UniCredit. The Italian bank’s stock rallied 4% as the two institutions prepare for discussions on Friday. On the central bank front, the Swiss National Bank (SNB) cut interest rates by 25 basis points—its third move this year—though markets had anticipated a larger 50-bp reduction.
At the European Central Bank (ECB), policy doves are pushing for a rate cut next month, though this move faces resistance from more conservative members. Investors are split, giving a 50% probability of a cut in October.
