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Europe stock markets mixed on Chinese stimulus, ECB meeting

written by Bella Palmer
ecb-policy

The DAX index in Germany was 0.3% higher, while the CAC 40 in France declined 0.2% and the FTSE 100 in the U.K. tumbled 0.2%

European stock markets have started the new week in a cautious manner Monday, as investors digested more talk of Chinese fiscal stimulus ahead of a rate-setting meeting by the ECB.

At 07:10 GMT, the DAX index in Germany was 0.3% higher, while the CAC 40 in France declined 0.2% and the FTSE 100 in the U.K. tumbled 0.2%.

European equities appear to be searching for direction at the start of a new week after a choppy session in Asia on Monday in the wake of Beijing's latest stimulus pledges.

China’s finance ministry said in a weekend briefing that it will implement fiscal stimulus measures, including more debt issuance and support for provincial governments.

But the government did not provide key details on the planned measures - especially their timing and scale. This left investors wanting, after a similar occurrence in late-September.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes both gained strongly, after early wild swings, but Hong Kong’s Hang Seng index declined.

Goldman Sachs raised its 2024 real GDP forecast for China to 4.9% from the previous 4.7%, citing the “more forceful and coordinated” stimulus policies from Chinese authorities, but this is still below the official 5% growth forecast.

China is a major export market for Europe’s large companies, and its economy has been struggling in the face of sluggish consumer spending and a real estate crisis.

The ECB meets on Thursday, and is expected to ease monetary policy by 25 bps once more.

Eurozone business activity unexpectedly declined in September, while inflation dropped below the European Central Bank's 2% target - data which suggests that the eurozone economy is in worse shape than when the policymakers last met.

In the press conference, President Lagarde is likely to acknowledge the increased downside risks to the growth outlook, said analysts at ABN Amro, in a note, while repeating the language from a recent speech that ‘latest developments strengthen our confidence that inflation will return to target in a timely manner.’

In the corporate sector, the European luxury sector is likely to be in focus Monday given the importance of the Chinese market, with the sector benefiting strongly since Beijing started unveiling stimulus.

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