Key Points
- European markets opened cautiously amid Chinese stimulus uncertainty and an upcoming ECB meeting.
- China’s finance ministry pledged fiscal stimulus, but the lack of specifics left investors uncertain.
- Goldman Sachs raised China’s 2024 GDP forecast to 4.9%, still below the official 5% target.
- The ECB is expected to ease monetary policy by 25 basis points due to weakening Eurozone business activity and inflation.
European stock markets opened cautiously on Monday as investors absorbed news of potential Chinese fiscal stimulus and awaited a key rate-setting meeting by the European Central Bank (ECB). At 4:16 AM ET (8:16 AM GMT), Germany’s DAX index was up 0.56% or 108.48 to 19,482.31, while France’s CAC 40 increased by 0.095% or 7.18 to 7,585.07 and the UK’s FTSE 100 rose by 0.051% or 4.18 to 8,257.83.
European equities struggled for direction after a volatile Asian session, driven by Beijing’s latest stimulus announcements. Over the weekend, China’s finance ministry pledged new fiscal measures, including additional debt issuance and support for local governments. However, a lack of specifics—such as the timing and scale of these measures—left investors disappointed, mirroring a similar occurrence in late September.
Chinese markets reacted differently to the news. The Shanghai Shenzhen CSI 300 and the Shanghai Composite indexes rose sharply after initial fluctuations, while Hong Kong’s Hang Seng index, which is more exposed to foreign investors, declined.
In light of the stimulus, Goldman Sachs raised its 2024 GDP forecast for China to 4.9%, up from the previous 4.7%, but this figure remains below the official target of 5%. China’s economic struggles, particularly in consumer spending and real estate, have raised concerns, especially as the country is a major export market for Europe’s top companies.
The ECB is set to meet on Thursday and is expected to ease monetary policy by 25 basis points. Recent data shows Eurozone business activity contracted unexpectedly in September, while inflation fell below the ECB’s 2% target. This suggests the region’s economic outlook has worsened since the last policymakers’ meeting.
ABN Amro analysts noted that ECB President Christine Lagarde will likely acknowledge the increased risks to the Eurozone’s growth outlook. However, they expect her to reaffirm confidence that inflation will return to target in a timely manner.
Given its reliance on the Chinese market, the European luxury sector will likely draw attention to the corporate front. Since Beijing began rolling out stimulus measures, luxury brands have benefited. French luxury giant LVMH, home to brands like Louis Vuitton and Tiffany’s, will report third-quarter revenue on Tuesday, which investors will watch closely.
Crude oil prices fell sharply on Monday, weighed down by disappointing Chinese economic data. Consumer inflation in China unexpectedly eased in September, while producer inflation continued its nearly two-year contraction. These developments raised concerns about demand from China, the world’s largest oil importer. The report from the Organization of Petroleum Exporting Countries (OPEC) could offer more insights into supply dynamics, while the Middle East conflict remains a significant factor.
