A look at the day ahead at Rae Wee’s European and global markets
Beijing’s latest stimulus pledges were met with a mixed and volatile reaction in Chinese stocks on Monday, with investors showing no consensus over the weekend on promises that were long in outline but short on details.
Hong Kong shares got off to a choppy start before falling decisively, unlike their peers in mainland China, which traded mostly higher.
Some analysts attributed the divergent performance to the lack of a dollar figure for the package, which may have been more important to foreign investors than to their Chinese counterparts.
The sweeping measures – from helping local governments tackle their debt problems to supporting the real estate market and replenishing the capital of state-owned banks – underlined policymakers’ commitment to supporting China’s ailing economy.
But the limited scope of efforts to boost domestic consumption remains a major concern for investors, especially after data on Sunday showed Chinese consumer inflation unexpectedly eased in September, while producer price deflation deepened.
The mixed picture in Chinese markets on Monday set a negative tone for Europe, where EUROSTOXX 50 futures and FTSE futures both fell around 0.1%.
Attention will be focused on the shares of European luxury companies given the focus on China, with the top 10 European luxury stocks already up almost 9% since September 24, when Beijing unveiled its most aggressive stimulus measures since the pandemic.
The week also brings a slew of data from China, including the country’s third-quarter growth figures on Friday, so there will be a lot for investors to chew on in the coming days.
Apart from China, an interest rate decision from the European Central Bank will come on Thursday, with policymakers expected to implement a 25 basis point interest rate cut. British inflation figures will be released on Wednesday.
Statements from the Federal Reserve’s Neel Kashkari and Christopher Waller are expected later on Monday, and there is strong interest in what they might say about the central bank’s interest rate outlook.
An excessive 50 basis point rate cut next month is now off the table given signs of a resilient US economy, which has kept the dollar well supported and hovering around a seven-week high on Monday against a basket of large industry peers.
Key developments that could impact the markets on Monday:
– Feds Kashkari and Waller speak
– France reopens auctions of government bonds with a term of 3, 6, 7 and 1 year
– Germany reopens the auction of government bonds with a term of one year
(By Rae Wee; editing by Edmund Klamann)
