Global Stocks Surge as China Announces Economic Stimulus Measures

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LONDON/SINGAPORE, – Global stock markets hit record highs on Tuesday following China’s announcement of new stimulus measures aimed at supporting its slowing economy. The move boosted Asian and European stocks and triggered a rise in commodity prices.

People’s Bank of China (PBOC) Governor Pan Gongsheng revealed plans to lower borrowing costs, inject more funds into the economy, and ease household mortgage repayment burdens. The PBOC also plans to introduce structural monetary policy tools to stabilize capital markets for the first time.

These measures sparked significant gains in Chinese stocks, with the blue-chip CSI300 index and the Shanghai Composite index both surging over 4%. Hong Kong’s Hang Seng Index also jumped 4.1%, reaching a four-month high.

“The immediate reaction is certainly positive for markets because the measures have been more forceful than previous ones,” said Ecaterina Bigos, Chief Investment Officer for Asia (ex Japan) at AXA Investment Managers. “However, for a sustained impact, we need to see further support from fiscal policies as we approach the year-end.”

Despite these gains, Chinese stocks have underperformed in Asia, with the CSI300 index down 2.3% this year, largely due to previous stimulus efforts failing to revitalize the market.

In Europe, the pan-European STOXX 600 index rose 0.6%, led by gains in China-exposed mining and luxury stocks. Germany’s DAX also traded near record highs.

Meanwhile, the MSCI World Index, which tracks global equities, gained 0.3%, reaching a record high. U.S. futures suggested a quiet opening on Wall Street, with modest gains expected.

Commodity markets responded positively to the upbeat mood, with oil prices climbing over 2%. Copper prices surged to a 10-week high on expectations of increased demand from China. Iron ore futures on China’s Dalian Commodity Exchange saw their largest intraday gain in over a year, while gold prices hit a record high of $2,639.95 amid rising tensions in the Middle East, fueling demand for safe-haven assets.

Reserve Bank of Australia Holds Steady

Elsewhere, the Reserve Bank of Australia (RBA) kept interest rates unchanged, maintaining a tight policy stance. This contrasts with the U.S. Federal Reserve, which began its easing cycle last week with a 50-basis-point rate cut. The Australian dollar rose 0.1% to $0.6846, briefly reaching its strongest level of the year.

The U.S. dollar strengthened against the yen, touching a 20-day high. Bank of Japan Governor Kazuo Ueda signaled no rush to raise rates, emphasizing a cautious approach to monetary policy adjustments.

U.S. markets remain divided on whether the Federal Reserve will cut rates by 50 or 25 basis points in November. According to the CME FedWatch tool, markets are pricing in 76 basis points of easing by year-end.

Elias Haddad, Senior Markets Strategist at Brown Brothers Harriman, warned that the market might be overestimating the Fed’s ability to continue easing. “It will likely take strong U.S. jobs data to prompt a reassessment of Fed rate expectations,” Haddad noted, with the next key data release, the non-farm payrolls report, due on October 4.

The dollar index, which tracks the U.S. currency against six major rivals, edged slightly lower to 100.86, close to a one-year low. The euro also rose 0.1% to $1.1123 after dropping on Monday amid weak eurozone business activity data, which heightened expectations for further rate cuts by the European Central Bank.

This surge in global stock markets comes as policymakers around the world navigate economic uncertainties, with China’s aggressive stimulus plan providing a temporary boost to investor confidence.

Source: Reuters