Investment Team Handelsbanken Wealth & Asset Management
30 Sep 2024 5
Key takeaways
Financial markets turned their attentions to China last week, as Beijing’s authorities pulled out all the stops to boost an embattled property sector and uneasy consumers. Meanwhile, inflation in the US and Europe continued its downward trend.
Chinese leaders attempt an economic bazooka
Throughout the week, Chinese authorities have announced a new, coordinated programme of economic stimulus. The central bank enacted a range of interest rate cuts, including lower mortgage rates and a relaxation of the rules for second home purchases. The ruling political party later announced that it would also be increasing government spending and providing further support to the property sector. These moves come as part of a new effort to help the world’s economic giant recover from a property market collapse which began in 2021. This, combined with factors like the handling of the COVID-19 crisis, has had knock-on effects for Chinese consumers, who appear to have lost faith in the nation’s policymakers.
European share prices are among the near-term beneficiaries
A mixed bag of private sector survey data suggested some growth in the US, while mainland Europe fell into contraction for the first time since early this year. Despite this, European stock markets hit new highs during the week, partly due to the anticipated boost to Chinese consumers as part of the economic stimulus outlined above. China is Europe’s second most significant trading partner, and the share prices of European luxury goods firms performed especially well over the week.
Inflation still appears to be easing back towards target levels
Inflation broadly continued its downward trend in September. In Europe, pricing pressures have in fact dropped below their 2% target. Across the Atlantic in the US, the latest reading of the PCE (Personal Consumption Expenditures) measure of inflation – which is the measure targeted by the US Federal Reserve (Fed) – was lower than expected, and only fractionally above the central bank’s 2% target. With the Fed’s attention increasingly turning to changeable US employment markets, and consumers waiting for further interest rate cuts, this will be taken as encouraging news.
Market moves
Global stock markets rose again last week, with US and global shares reaching new record highs, responding to news of aggressive new economic policies in China.
Bond yields were mixed, with slight increases in the US, UK, and Japan but falls in Europe. (Bond prices and yields move in opposite directions.)
Despite an escalation in the Middle East conflict, oil prices fell with Saudi Arabia set to increase production and Libyan production returning.
Meanwhile, the gold price continued to hit new highs, and ends September as one of the month’s top performers.
What to look out for this week
US central bank chair Powell is set to speak later today at the National Association for Business Economics' annual meeting in Nashville. Investors are hoping for clues on the central bank's next steps following the interest rate cut earlier this month.
US employment market data will be announced on Friday.
Also in the spotlight will be an early look at inflation data in Europe.