European Markets Hit New Highs Amid China-Driven Rally

European stock markets reached a fresh record high in mid-morning trading on Friday, fueled by strong momentum from a rally in Asia, led by China.

As of 05:13 ET (09:13 GMT), the pan-European Stoxx 600 index rose by 0.3% to 526.92, having previously hit an intraday high of 526.51. Germany’s DAX index gained 0.6%, France’s CAC 40 rose 0.3%, and the U.K.’s FTSE 100 edged up 0.3%.

Anticipated Chinese Stimulus Boosts Market Sentiment

China’s central bank took action to stimulate the country’s economy, cutting interest rates and injecting additional liquidity into the banking system. This move is part of Beijing’s ongoing efforts to achieve a 5% growth target this year and follows an earlier stimulus package announced this week. According to Reuters, these new measures are expected before a week-long holiday beginning on October 1.

Reports suggest that cities like Shanghai and Shenzhen may soon lift key home purchase restrictions, while officials are considering a special sovereign bond issuance worth approximately 2 trillion yuan ($284.43 billion). Analysts from Capital Economics estimate that this potential stimulus package could increase China’s GDP by around 0.4% over the next year.

These actions helped propel Chinese stocks to their best weekly performance since 2008 and positively impacted European markets, particularly luxury and automotive stocks, which have significant exposure to Chinese consumers. Shares of luxury brands such as LVMH, Kering, Hermes, Hugo Boss, and Burberry experienced gains. Moncler shares saw an extra boost following LVMH’s decision to acquire up to a 22% stake in the investment vehicle controlling the Italian luxury outerwear brand.

French and Spanish Inflation Eases; Focus Shifts to U.S. Data

In Europe, inflation data showed that price growth in France and Spain slowed more than expected in September. This development could increase the likelihood of another interest rate cut from the European Central Bank next month. In France, annual consumer price growth slowed to 1.2% from 1.8% in August, while in Spain, it dropped to 1.5% from 2.3%, both falling short of economists’ forecasts.

Investors are now turning their attention to upcoming personal spending and inflation data from the U.S., which could provide insights into the health of the world’s largest economy. The Federal Reserve recently implemented a substantial 50 basis point interest rate cut, and further reductions are anticipated later this year.

Economists predict U.S. personal spending grew by 0.3% in August, down from 0.5% in July. Meanwhile, the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation measure, is expected to have risen by 0.2% in August, maintaining the previous month’s pace, with the year-over-year figure projected to slow to 2.3% from 2.5%.