Stimulus Measures in China and Fed Rate Cut Propel Global Equities to New Highs
Sayali ShirkeCategories: DSIJ_Magazine_Web, DSIJMagazine_App, Editorial, Market Moves, Market Watch
The U.S. economic reports last month also impacted market sentiment.
Stocks reached new all-time highs in the past fortnight, fueled by optimism stemming from the Federal Reserve's recent interest rate cut, continued excitement around artificial intelligence and fresh economic stimulus from China
Both the Dow Jones Industrial Average and the S&P 500 Index hit record levels at the end of September, as investors appeared to welcome China’s new stimulus initiatives. Materials and chemicals stocks saw significant gains, driven by hopes of a recovery in Chinese demand. Copper prices also rose, sparking optimism that the commodity, often seen as a gauge of global economic health, might be signalling an industrial rebound. Technology stocks outperformed, boosted by speculation around a potential Intel acquisition and news that NVIDIA's CEO had halted sales of his own shares. Additionally, Micron Technology shares surged following a positive forecast regarding AI demand, providing a lift to the entire chipmaking sector.
The U.S. economic reports last month also impacted market sentiment. The Conference Board reported a sharp decline in U.S. consumer confidence in August, dropping the index to 98.7, near the lower end of its range over the past two years. The labour market outlook also deteriorated, with the index measuring consumers' perception of job market conditions falling to 81.7, approaching a level that has historically been a recession signal.
Across the Atlantic, European stocks rallied in local currencies, with the pan-European STOXX Europe 600 Index rising by 2.69 per cent. Slower business activity raised hopes for potential rate cuts. China’s stimulus announcements also helped lift European markets. Major indices in Europe saw strong gains, with Germany’s DAX increasing 4.03 per cent, France’s CAC 40 up 3.89 per cent, and Italy’s FTSE MIB climbing 2.86 per cent. The UK’s FTSE 100 Index advanced by 1.10 per cent.
Chinese stocks surged in the past fortnight following Beijing’s announcement of several measures designed to revitalize the economy. The Shanghai Composite Index jumped 12.8 per cent, while the CSI 300 Index soared 15.7 per cent. Hong Kong’s Hang Seng Index also gained 13 per cent.
In Asia, Japan’s stock markets had a strong week, with the Nikkei 225 rising by 5.6 per cent and the TOPIX Index increasing by 3.7 per cent. Comments from the Bank of Japan, perceived as dovish, pushed the yen lower, creating a supportive environment for stocks. Additionally, optimism from China’s stimulus measures, aimed at countering weak economic growth and a faltering housing market, provided a boost to Japanese exporters with strong ties to China.
Chinese stocks surged in the past fortnight following Beijing’s announcement of several measures designed to revitalize the economy. The Shanghai Composite Index jumped 12.8 per cent, while the CSI 300 Index soared 15.7 per cent. Hong Kong’s Hang Seng Index also gained 13 per cent. This marked the largest weekly gain for the CSI 300 since 2008 when China introduced a massive stimulus package during the global financial crisis.
The People’s Bank of China (PBOC) took further steps to support the economy by reducing the reserve requirement ratio for most banks by 50 basis points, marking the second reduction this year. The central bank also cut its seven-day reverse repo rate by 20 basis points to 1.5 per cent and slashed the medium-term lending facility rate by 30 basis points to 2 per cent, its largest cut since 2016. The PBOC also introduced new measures to reduce mortgage rates on existing homes and lowered the down payment requirement for second homes from 25 to 15 per cent, all aimed at stabilising China’s struggling economy.