European Stocks Start the Week Cautiously Amid Chinese Stimulus Talk and ECB Meeting

European stock markets opened the week on a cautious note Monday, as investors processed discussions of potential Chinese fiscal stimulus while awaiting the European Central Bank’s upcoming rate-setting meeting.

As of 03:10 ET (07:10 GMT), Germany’s DAX index edged 0.3% higher, while France’s CAC 40 and the U.K.’s FTSE 100 both slipped by 0.2%.

Uncertainty Over Chinese Stimulus Pledges
European equities are seeking direction after a volatile session in Asia on Monday following Beijing’s latest promises of economic support. China’s finance ministry announced over the weekend plans for fiscal stimulus, including increased debt issuance and financial aid for provincial governments. However, the absence of key details, such as the scale and timing of these measures, left investors uncertain—similar to the lack of specifics in late September.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes saw strong gains after initial volatility, while Hong Kong’s Hang Seng index, more exposed to foreign investors, declined.

Goldman Sachs raised its 2024 GDP growth forecast for China to 4.9%, up from 4.7%, citing more “forceful and coordinated” stimulus efforts by the Chinese authorities. However, this figure still falls short of China’s official 5% growth target. China’s sluggish consumer spending and its ongoing real estate crisis have negatively impacted European exporters who rely heavily on the Chinese market.

ECB Meeting on Thursday
The European Central Bank is scheduled to meet on Thursday, and expectations point to another 25 basis-point monetary policy adjustment. The eurozone economy showed signs of weakening in September, with business activity contracting and inflation falling below the ECB’s 2% target, signaling worsening economic conditions since the last ECB meeting.

Analysts from ABN Amro suggest that ECB President Christine Lagarde may acknowledge heightened risks to growth during the press conference, while maintaining optimism that inflation will return to target levels in a timely manner.

European Luxury Sector in Focus
The European luxury sector is drawing attention due to its heavy reliance on the Chinese market. This sector has benefited significantly since Beijing introduced stimulus measures aimed at boosting consumer spending. French luxury conglomerate LVMH, home to brands like Louis Vuitton, Dior, and Tiffany, is set to release its third-quarter revenue on Tuesday.

U.S. Banking Sector in the Spotlight
Looking across the Atlantic, the banking sector is under scrutiny with earnings reports expected from major institutions, including Bank of America, Goldman Sachs, and Morgan Stanley. This follows strong performances from JP Morgan Chase and Wells Fargo, both of which exceeded market expectations last week.