Stimulus measures announced in China boosted sentiment across global stock markets.
US: Stocks move to new highs
Stocks moved to record highs, as investors appeared to celebrate new stimulus measures in China. Chemicals and materials stocks were particularly strong on hopes for a rebound in Chinese demand. Technology stocks outperformed as well, helped by reports of a possible takeover of Intel and news that NVIDIA’s CEO had ceased sales of his own shares in the company. Some benign inflation data helped spur an early rally Friday. Before trading opened, the Commerce Department reported that the Federal Reserve’s preferred inflation gauge, the core (less food and energy) personal consumer expenditures (PCE) price index, rose only 0.1% in August, a tick below expectations. Meanwhile, personal incomes and spending both surprised on the downside in August, further suggesting a moderation in inflationary pressures.
Japan: Stocks propelled by Chinese stimulus
Japan’s stock markets gained over the week. The latest commentary from the Bank of Japan (BoJ), weighed on the yen, providing a favourable backdrop for stocks. Optimism also came from China’s stimulus announcements detailing various support mechanisms in response to the country’s sluggish economic growth and weak housing market. Given the share of Japanese exports that go to China and Japan’s sensitivity to Chinese purchasing managers’ index and other economic data, the stimulus announcements boosted the many Japanese companies that are direct or indirect China beneficiaries.
China: Stimulus measures announced by central bank
Chinese stocks surged after Beijing unveiled a slew of measures to shore up the economy. The moves were part of a sweeping stimulus package announced last Tuesday at a rare press conference by the Peoples Bank of China Governor that aims to jumpstart China’s ailing economy. On Thursday, China’s top leaders vowed to take action to stabilize the country’s property market and make real estate prices “stop declining,” according to state media. The readout from the meeting included a statement that China would deploy the necessary fiscal spending to meet its 2024 growth target of around 5%.
Europe: Slowing business activity spur interest rate cut hopes
European stocks rebounded last week, as evidence of slowing business activity spurred hopes for interest rate cuts. China also unveiled a package of measures to stimulate its economy, helping to lift sentiment. Business activity in the eurozone unexpectedly shrank in September due to a marked fall in new orders, according to purchasing managers’ indexes (PMIs) compiled by S&P Global.
UK: Inflation continues to ease
In the UK private sector activity remained in expansionary territory for the 11th month running. The Flash UK PMI Composite Output Index registered 52.9, down from 53.8 in August. Separately, inflation, as measured by prices charged, eased across the economy to a 42-month low, further driving pressure on the Bank of England to continue reducing interest rates.