European Stocks Rally as China Spurs Risk Appetite: Markets Wrap

European stocks advanced, tracking a rally in Asia after China’s central bank unveiled a slew of stimulus measures aimed at shoring up economic growth.

The Stoxx Europe 600 Index rose as much as 0.9%, led by sectors with heavy exposure to China, including miners, luxury goods makers and automakers. Brent crude topped $74 a barrel and iron ore prices climbed, boosting the shares of Rio Tinto Plc and BHP Group Ltd. US equity futures edged higher, while Treasury yields were little changed.

Risk sentiment got a boost from China’s broad package of monetary stimulus on Tuesday, which included reduced reserve requirements for banks and at least 800 billion yuan of liquidity support for stocks. While sending Chinese equities to their best day since July 2020, the news from Beijing helped offset concerns in Europe that economic growth is flagging.

“These measures clearly show Beijing now understands and appreciates the urgency of boosting stock market and housing market sentiment,” said Siguo Chen, portfolio manager at RBC BlueBay Asset Management. “Short term, it will help the market find a bottom, but long term I think we need to see more fiscal support.” 

China’s stimulus announcement came after several Federal Reserve officials on Monday appeared to leave the door open to additional large rate cuts in the US.

Chicago Fed President Austan Goolsbee said with inflation approaching the central bank’s target the focus should turn to the labor market and “that likely means many more rate cuts over the next year.” Neel Kashkari at the Minneapolis Fed also pointed to weakness in the job market, saying he backs lowering interest rates by another half percentage point by year end.

Traders have been wagering on nearly three-quarters of a point of policy easing by year-end, suggesting at least one more major rate cut is in store. Investors are now awaiting data on the Fed’s preferred price metric and US personal spending later this week.

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A gauge of emerging-market stocks jumped more than 1% after the announcement by People’s Bank of China Governor Pan Gongsheng.

The measures included a cut to a key short-term interest rate and plans to reduce the amount of money banks must hold in reserve to the lowest level since at least 2018, as well as other announcements including a package to shore up the nation’s troubled property sector. 

Gold hit a fresh record of $2,636.16 per ounce during Asian market hours. 

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Some of the main moves in markets: 

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This story was produced with the assistance of Bloomberg Automation.

With assistance from Mark Cudmore and Winnie Hsu.

This article was generated from an automated news agency feed without modifications to text.