2024 - Market: favorable wind from China

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(CercleFinance.com) – European stock markets are generally on the rise (+0.2% in London, +0.6% in Frankfurt, +1.4% in Paris), driven by the recent announcement of economic support measures taken by the Chinese authorities.

‘It has been brewing for several weeks, but this time it is concrete: China has announced a series of measures targeting real estate credit, banks, stock markets and liquidity,’ points out Alexandre Baradez, head of market analysis at IG France.

In particular, it mentions a reduction in the prudential reserve ratio for Chinese banks (to its lowest level since 2020 and the pandemic), as well as a short-term lending rate to banks (seven days), to stimulate credit.

“Even if it is not a ‘bazooka’, the measures taken by the Chinese authorities are relevant and targeted in relation to the difficulties that the country has been facing for several years,” the analyst believes.

This context pushes the Ifo business climate index in Germany into the background, which fell from 86.6 in August to 85.4 in September, a level below the consensus (86.1) according to Capital Economics, but close to its own forecast (85.5).

“The fall in the index provides further evidence that the German economy is back in recession,” the London-based analyst firm warned, adding however that this reinforces the likelihood of a rate cut by the ECB in October.

The Chinese announcements are largely benefiting European luxury stocks, such as Richemont in Zurich, or Kering, Hermès and LVMH in Paris, which are all posting gains of around 4 or 5%.

Still in the news of values, UniCredit (+2% in Milan) and Commerzbank (+2% in Frankfurt) also outperformed the trend, the Italian having increased its stake in the German to around 21% of the capital against 9% previously.

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