European stock markets closed higher on Friday, with the exception of London, as Chinese economic stimulus and reassuring US data positively influenced sentiment. The CAC 40 rose 0.39%, while the DAX gained 0.38%. The EuroStoxx 50 increased by 0.74%. However, weak Chinese GDP growth kept investors cautious. Amid expectations of further ECB rate cuts, the luxury and basic resources sectors benefited. In the US, retail sales surprised positively, impacting inflation expectations ahead of upcoming corporate results.
by Diana Mandia
European stock markets closed positively on Friday, with the exception of London, largely influenced by China’s recent economic stimulus initiatives, favorable US economic reports, and prospects for further interest rate reductions by the European Central Bank (ECB).
In Paris, the CAC 40 increased by 0.39% to reach 7,613.05 points. Meanwhile, the DAX in Frankfurt rose by 0.38%, but the FTSE 100 in London fell by 0.32%, as investors reacted to an unexpected uptick in retail sales for September.
The EuroStoxx 50 index recorded a 0.74% rise, the FTSEurofirst 300 advanced by 0.23%, and the Stoxx 600 climbed by 0.19%. For the week, the Stoxx 600 saw a gain of 0.56%, while the CAC 40 finished up 0.46%.
Beijing’s announcement of new measures to bolster its financial markets came at a critical time when the world’s second-largest economy is facing scrutiny over its stimulus strategies. This news particularly benefited sectors like basic resources and luxury goods, which had recently suffered due to concerns about growth in the Chinese market.
Despite the positive news, disappointing economic figures from China kept investor sentiment cautious. China’s GDP growth for the third quarter was the slowest since the beginning of the year.
European stock markets also found support from anticipated rate cuts by the ECB, which had previously implemented its third borrowing cost reduction since June and is reportedly planning another cut in December.
François Villeroy de Galhau, Governor of the Banque de France, mentioned that inflation in the eurozone, which has been slowing down, risks dropping below the ECB’s target of 2%. According to LBP AM, while growth is sluggish, the ECB currently sees no significant recession risk, with expectations for further rate cuts in the upcoming months.
US retail sales data released on Thursday exceeded forecasts and added to market optimism as investors prepared for a busy week of corporate earnings and key economic indicators, including the Eurozone activity PMI.
In the US, inflation expectations rebounded in October amid rising political prospects for Donald Trump, which could influence the Federal Reserve’s inflation targets.
STOCK PERFORMANCE
A positive sentiment towards China uplifted the luxury sector, which had experienced a decline earlier in the week following disappointing results from LVMH, leading to a rise of 2.2%. Kering saw a 3.5% increase, while Hermès climbed 1%. The overall luxury sector index was up 1.1%.
The basic resources sector benefited from Chinese economic measures, gaining 1.5% on Friday. Antofagasta and Anglo American registered increases of 1.4% and 1.8%, respectively, on the London exchange.
Additionally, the technology sector advanced by 1.9%, driven by optimistic results from Taiwanese chipmaker TSMC.
In Paris, Virbac experienced a significant drop of 12.6% after releasing its quarterly financial results.
WALL STREET UPDATE
As European markets closed, the Dow Jones was down 0.15% after reaching a new all-time high on Thursday. In contrast, both the S&P 500 and the Nasdaq Composite edged higher, with gains of 0.31% and 0.64%, respectively, bolstered by technology stocks.
MARKET INDICATORS
In the UK, retail sales for September rose by a surprising 0.3%, according to the Office for National Statistics (ONS). Alex Curr, UK economist at Capital Economics, stated that this increase suggests households are temporarily ignoring concerns about potential tax increases expected in the budget announcement on October 30.
The UK government is preparing to disclose its draft budget, likely to include tax hikes, although officials assure that it will be “worker-friendly.”
CURRENCY MOVEMENTS
The dollar slipped by 0.25% against a basket of major currencies following better-than-expected US retail sales, which had propelled it to an 11-week high. Conversely, the euro rose by 0.26% to $1.0859.
BOND MARKET TRENDS
In the eurozone, bond yields fell on Friday as markets adjusted their expectations for the ECB’s easing measures. According to Nick Chatters from Aegon Asset Management, recognizing the potential downside risks to inflation was crucial. The yield on the ten-year German Bund decreased by 1.7 basis points to 2.1850%,