Europe’s STOXX 600 Reaches All-Time High as China-Exposed Firms Benefit from Stimulus Boost

By Pranav Kashyap and Shashwat Chauhan

Europe’s share index reached a new record high on Friday, driven by gains in companies and sectors with significant exposure to China. This followed a series of stimulus measures announced by Beijing this week, with luxury brands among the biggest beneficiaries.

The pan-European STOXX 600 index closed up 0.5% at 528.08, ending the week with a gain of over 2%. Sectors closely linked to China, such as automakers and chemicals, saw substantial gains, each rising more than 2%, highlighting the importance of the Chinese market to European businesses.

In a bid to bolster economic growth toward its target of around 5% for the year, China’s central bank has lowered interest rates and provided additional liquidity to the banking system. Analysts at Danske Bank noted that this marks an intensified commitment to stimulus, emphasizing that reviving the economy is now the top priority. They described this as the most significant round of stimulus since the current crisis began three years ago, suggesting it could represent China’s "whatever-it-takes" moment.

Luxury firms also experienced substantial increases, with LVMH and Richemont rising by 3.7% and 2.7%, respectively. A measure tracking ten of Europe’s largest luxury brands registered a 2.6% gain, accumulating a weekly increase of over 13%, the highest since the index’s inception in 2016. Moncler surged by 10.9% following news that LVMH acquired a minor stake in the Italian outerwear brand.

In addition, inflation rates dropped more than anticipated in major eurozone economies, including France and Spain, while the German job market continued to show signs of cooling. These developments strengthened the argument for the European Central Bank (ECB) to consider cutting borrowing costs in its next meeting. Major financial institutions like Goldman Sachs and JPMorgan are now predicting a quarter-point rate cut at the upcoming ECB meeting on October 17.

Government bond yields in the eurozone fell on Friday, reflecting shifting market sentiment.

In other stock news, Novo Nordisk experienced a decline of 4.6%, as analysts highlighted a report from JPMorgan predicting that the company’s quarterly results would fall short of expectations. Conversely, Britain’s Cranswick saw its shares rise by 6.7% after the meat producer forecasted its annual profits at the higher end of market estimates.