European stocks experienced a downturn on Monday as investors reacted to China’s recent economic support measures, which failed to meet expectations for new stimulus. The Stoxx 600 index fell by 0.7%, as Chinese officials reiterated their commitment to meeting economic targets without announcing any additional measures to invigorate growth. This lack of substantial support particularly impacted European mining and luxury sectors, with shares of Kering SA and Burberry Plc dropping more than 5%.
In the United States, Chinese stocks listed on US exchanges saw a significant decline in premarket trading. Earlier, a benchmark for Chinese shares in Hong Kong recorded its steepest intraday drop since 2008. The commodity markets also reacted negatively, with oil prices slipping below $80 per barrel.
“The enthusiasm around potential stimulus from China is waning,” commented Benoit Anne, investment director at MFS Investment Management. Despite this, Anne noted that overall risk sentiment remains strong, bolstered by expectations of falling interest rates in the US and Europe, albeit tempered by concerns over Chinese economic developments, rising bond yields, and escalating tensions in the Middle East.
In the bond market, Treasury yields experienced a slight retreat after surpassing 4% on Monday, as investors moderated their expectations regarding Federal Reserve interest-rate cuts. Meanwhile, US equity futures steadied following Monday’s decline, with S&P 500 and Nasdaq 100 contracts up approximately 0.3%.
Market participants are now turning their attention to US inflation data set for release on Thursday, which will inform expectations for the Fed’s policy direction. Current market swaps indicate that the Fed is expected to implement a cut of less than a quarter-point in November, a sentiment supported by comments from Federal Reserve Governor Adriana Kugler, who advocated for a “balanced approach” regarding future rate adjustments.
On the corporate front, major US banks will commence the earnings season in earnest on Friday, with investor focus on forward guidance for the upcoming quarters. “Investors will be looking to establish a 2025 outlook and gain insights from the corporate sector regarding earnings projections for next year,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management.
Among notable individual stock movements, Super Micro Computer Inc. rose over 2.5% in premarket trading, driven by shipment data indicating strong demand for its servers. Conversely, European housebuilder Vistry Group Plc saw its stock plummet by as much as 36% following a substantial reduction in its profit forecast.
Key Economic Events This Week:
Tuesday: Speeches from Fed officials Raphael Bostic, Susan Collins, Philip Jefferson, and Adriana Kugler.
Wednesday: Release of Fed minutes and speeches by Lorie Logan, Raphael Bostic, Austan Goolsbee, and Mary Daly.
Thursday: US initial jobless claims and Consumer Price Index (CPI) data, along with speeches from Fed’s John Williams and Thomas Barkin.
Friday: Major banks including JPMorgan and Wells Fargo kick off earnings season; US Producer Price Index (PPI) and University of Michigan consumer sentiment data are also released.
Market Summary:
Stocks
- Stoxx Europe 600: -0.7% at 10:23 a.m. London time
- S&P 500 futures: +0.3%
- Nasdaq 100 futures: +0.4%
- Dow Jones Industrial Average futures: +0.1%
- MSCI Asia Pacific Index: -2.2%
- MSCI Emerging Markets Index: -2.2%
Currencies
- Bloomberg Dollar Spot Index: little changed
- Euro: +0.1% at $1.0989
- Japanese Yen: +0.3% at 147.75 per dollar
- Offshore Yuan: +0.2% at 7.0543 per dollar
- British Pound: little changed at $1.3096
Cryptocurrencies
- Bitcoin: -0.9% at $62,428.48
- Ether: -0.7% at $2,425.07
Bonds
- 10-Year Treasury yield: -1 basis point at 4.01%
- Germany’s 10-year yield: little changed at 2.26%
- Britain’s 10-year yield: little changed at 4.21%
Commodities
- Brent Crude: -2.1% at $79.26 per barrel
- Spot Gold: -0.1% at $2,638.64 per ounce
This week, the financial markets remain poised for key economic data and corporate earnings that may influence future market trends and monetary policy decisions.
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