European Shares Close Up as Markets React Positively to China’s Stimulus Plans – Reuters

By Pranav Kashyap and Shashwat Chauhan

European shares finished higher on Tuesday, propelled by companies exposed to China, including luxury brands and automakers, following the announcement of extensive stimulus measures by China’s central bank aimed at revitalizing its struggling economy.

The pan-European index rose by 0.7%, with France emerging as the top performer, enjoying a 1.3% increase, attributed to its concentration of luxury brands.

China’s central bank introduced a range of monetary stimulus and measures to support the property market, aiming to counteract significant deflationary pressures and the risk of falling short of its growth targets for the year.

Economists at TS Lombard noted that the announcement had bolstered confidence, which could enhance household consumption and alleviate debt servicing burdens. However, they cautioned that it was insufficient to stabilize the property market or the broader economy, indicating an anticipated decline in nominal growth.

A benchmark for European luxury goods, heavily reliant on Chinese consumer spending, saw the most significant gains, surging 2.5%. LVMH’s shares increased by 3.2%, and Richemont, the parent company of Cartier, rose by 4.1%.

Basic resources stocks also contributed to the upward trend across major sectors, advancing 4.4%, marking the largest single-day gain in over 22 months, driven by rising base metal prices due to improved demand prospects from China. Additionally, other sectors linked to China, such as autos and industrials, experienced increases of 1.1% and 0.6%, respectively.

While most local markets ended the day with positive results, the UK’s midcap index fell by 0.4%, adversely affected by a 6.3% drop in homeware retailer Dunelm following the sale of a 4.9% stake by its largest shareholder and his private investment firm.

On the economic front, a survey indicated that German business confidence declined for the fourth consecutive month in September, falling more than anticipated. This raises concerns that Europe’s largest economy may have entered a recession.

German economic institutions have revised their 2024 forecasts downward, projecting a contraction of 0.1%, according to sources familiar with the autumn joint economic forecast.

Investors are also keeping an eye on upcoming interest rate decisions in Switzerland and Sweden later this week.

In terms of individual stocks, UK engineering company Smiths Group saw a 5.2% drop after reporting annual profits that fell short of expectations. Meanwhile, Saab’s shares fell by 9.3% following a downgrade of its rating by a prominent financial services firm, lowering it from "buy" to "neutral."