U.S. and World Markets Scale Higher After China Unleashed Aggressive Stimulus Measures

Alexander Garcia
24 Sep, 2024
Miami

Stocks overcame morning jitters, and benchmark indexes approached record highs following the 4% surge in artificial intelligence leader Nvidia.

The S&P 500 index and the Nasdaq Composite rose, and investors overlooked the latest update on consumer confidence. 

The consumer confidence index decreased to 98.7 in September from the upwardly revised 105.6 in August, the largest decrease since August 2021, The Conference Board said in a report Tuesday. 

“Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. 

Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income,” Dana Peterson, Conference Board's chief economist, said in a statement.

China-linked stocks advanced between 3% and 7% after the People's Bank of China announced several measures ahead of the holiday week to revive faltering economic growth and property markets. 

JD.com, Alibaba Group, Baidu, Tencent Holdings, and Yum China jumped in New York trading. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,729.29, the Nasdaq Composite rose 0.5% to 18,065.96, and the Russell 2000 index rose 0.3% to 2,226.41. 

The yield on 2-year Treasury notes edged lower to 3.57%, 10-year Treasury notes inched up to 3.75%, and 30-year Treasury bonds inched higher to 4.11%.

WTI crude oil increased $1.13 to $71.51 a barrel, and natural gas prices edged down 3 cents to $2.57 a thermal unit.

Gold rose by $36.45 to $2,663.40 an ounce, and silver increased by $1.53 to $32.21.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher to 100.54.

 

U.S. Stock Movers

Snowflake declined 0.5% to $112.67 after the cloud data management company announced its plans to raise $2 billion through a convertible bond offering. 

AAR Corp. decreased 3.8% to $66.33 despite the aviation services provider reporting better-than-expected quarterly results. 

The company said revenue in the fiscal first quarter ending in August increased 20% to $661.7 million from $448.4 million, net income swung to a profit of $18 million from a loss of $0.6 million, and diluted earnings per share were 50 cents compared to a loss of 2 cents a year earlier. 

Caterpillar jumped 3.8% to $385.08 after the People's Bank of China announced several stimulus measures to revive the faltering economic growth and support investor confidence. 

 

European Markets Traded Higher Following China's Broad Stimulus Measures 

European markets traded higher following a broad list of monetary stimulus measures announced by the People's Bank of China.

Benchmark indexes in Paris, London, and Frankfurt advanced after China's central bank announced wide-ranging measures to revive economic growth towards the 5% target rate. 

The People's Bank of China lowered its commercial bank reserve ratio by 50 basis points, which would pump about $141 billion of additional liquidity, and lowered existing mortgage loan rates by the same amount that is likely to benefit about 50 million households. 

The central bank also said it is ready to lower the reserve ratio requirement by an additional 50 basis points by the year's end, if needed. 

The broad set of stimulus measures lifted market indexes in mainland China and in Hong Kong by 4%, and luxury stocks in Paris, London, and Milan advanced following the announcements. 

Market enthusiasm was muted after Germany's business morale dropped to an eight-month low in September. 

The Ifo Business Climate Indicator decreased to the lowest level since January to 85.4 in September from 85.6 in August. 

 

Europe Indexes and Yields

The DAX index increased by 0.8% to 18,996.43; the CAC-40 index rose by 1.3% to 7,604.01; and the FTSE 100 index rose by 0.3% to 8,282.73. 

The yield on 10-year German bonds edged higher to 2.16%, French bonds inched higher to 2.94%, the UK gilts edged up to 3.97%, and Italian bonds decreased to 3.51%.

The euro edged lower to $1.11; the British pound inched higher to $1.33; and the U.S. dollar weakened to 84.82 Swiss cents.

Brent crude increased $1.44 to $75.64 a barrel, and the Dutch TTF natural gas fell by €0.38 to €35.82 per MWh. 

 

Europe Stock Movers

Mining companies and luxury goods makers traded higher after China announced a raft of monetary measures to revive the faltering economic growth rate. 

Antofagasta plc rose 6.8% to 1,948.50 pence, Anglo American advanced 6.6% to 2,262.97 pence, and Glencore jumped 4.5% to 402.20 pence. 

LVMH gained 3.4% to €614.80, Hermes International jumped 3.8% to €2,007.0, and Kering SA added 3.5% to €232.05. 

Crude oil explorers advanced amid rising tensions in the Middle East and general weakness in the U.S. dollar. 

BP plc gained 0.1% to 412.25 pence, Shell PLC increased 0.2% to €31.24, and BHP Group Ltd. advanced 4.1% to 2,127.0 pence. 

TotalEnergies SE jumped 1.2% to €63.07, and the French energy company signed an agreement to supply 200,000 tons of LNG to HD Hyundai Chemical for seven years starting 2027. 

CRH PLC declined 0.1% to 6,838.0 pence, and the company announced the appointment of a new chief executive. 

Johnson Matthey PLC advanced 1.4% to 1,500.0 pence after the company said its previously announced stock repurchase plan of £125 million will commence today. 

 

Japan Indexes Edged Higher After Service Growth Accelerated and Manufacturing Contracted In September 

Benchmark indexes in Tokyo edged higher after investors returned from a three-day holiday and reviewed the latest policy comments from the Bank of Japan Governor. 

The Nikkei 225 stock average and the Topix index gained at least 0.5% in active trading after China announced wide-ranging stimulus measures ahead of the holiday week. 

Bank of Japan Governor Kazuo Ueda said that the central bank's policy committee needs time to reassess the economic developments and market moves before adjusting policy measures. 

Market participants interpreted brief comments as a sign that the central bank is not in a hurry to raise interest rates. 

In addition, investors reviewed the latest updates on manufacturing and service sector activities. 

The service sector activities accelerated for the third month in a row and reached a five-month high, and the manufacturing sector contracted for the seventh month in 2024. 

The au Jibun Bank Japan Services PMI increased to 53.9 in September from the final 53.7 in August, S&P Global reported in its latest update released on Tuesday. 

The au Jibun Bank Japan Manufacturing PMI eased to 49.6 in September from 49.8 in August, S&P Global said in a separate report released Tuesday. 

The Japanese yen weakened to 144.37 against the U.S. dollar, and the yield on the Japanese government bond edged lower to 0.81%. 

 

Japan Stock Movers 

The Nikkei 225 Stock Averages increased 0.6% to 37,940.59, and the broader Topix index gained 0.5% to 2,656.73. 

Tech stocks traded volatile and struggled to advance despite the gains in the sector in overnight trading in New York. 

Tokyo Electron, Advantest, Screen Holdings, and Disco Corp. traded in a tight range. 

Kawasaki Heavy Industries increased 2.9% to ¥5,568.0, Mitsubishi Heavy Industries jumped 4.3% to ¥1,986.50, and Hitachi Ltd jumped 5% to ¥3,856.0. 

Seven & I Holdings decreased 0.4% to ¥2,139.0, Isetan Mitsukoshi advanced 2.6% to ¥2,203.50, and Fast Retailing added 0.3% to ¥47,930.0. 

 

China Indexes Jumped 4% After Monetary Stimulus Measures 

Stock market indexes in mainland China and Hong Kong soared as much as 4% after the central bank announced a slew of policy measures to revive economic growth and bolster market sentiment. 

The Han Seng index and CSI 300 indexes jumped nearly 4% after the People's Bank of China announced several measures to increase liquidity in the financial system, facilitate new home purchases, and lower the burden on existing home loan borrowers. 

The central bank lowered its reserve requirement ratio for commercial banks by 50 basis points to around 6.6%, in a move that is expected to inject one trillion yuan or $141 billion liquidity into the banking system. 

Governor Pan Gongsheng, at a press conference, also said that the central bank is prepared to lower the reserve ratio requirement by as much as an additional 50 basis points before the end of the year if needed. 

Governor Gongsheng also added that the down payment required for the second home purchase is lowered to 15% from the current 25% and interest rates for existing home loans by 50 basis points that will help about 50 million households or 150 million people, reducing annual household interest payment by 150 billion yuan. 

To send a strong signal to financial markets and underscore the importance of the latest measures, the central bank announced measures in a joint conference held with Li Yunze, the minister of the National Administration of Financial Regulation, and Wu Qing, chairman of the China Securities Regulatory Commission. 

The central bank plans to set up a loan facility for listed companies, stock brokerage firms, and mutual fund companies to purchase listed stocks and provide additional support to the stock market. 

Governor Gongsheng announced that the seven-day repo rate will be lowered to 1.5% from 1.7% and added that the move is expected to lower the medium-term loan rates by 0.3% and the loan prime rate by between 0.2% and 0.25%. 

The central bank announced a slew of new measures after the previous fund of 300 billion yuan to support the purchase of unsold residential properties failed to make a dent in the property weakness. 

The central bank's delayed measures are not likely to alter the downward trajectory of the stock market in the coming months without additional broad fiscal measures, as weak investor confidence and weakening consumer sentiment dominate trading. 

 

China Stock Movers 

The Hang Seng index soared 3.5% to 18,892.29, and the mainland-focused CSI 300 index jumped 3.4% to 3,323.27. 

Banks and property stocks soared after the central bank announced wide-ranging measures to stimulate the economy and inject financial liquidity. 

China Merchants Bank soared 10.5% to HK $34.30, Bank of China increased 3.1% to HK $3.66, and Industrial and Commercial Bank of China gained 5.2% to HK $4.67. 

Ping An Insurance jumped 7.1% to HK $40.45, and China Life Insurance added 6.1% to HK $12.94. 

China Resources Land added 5.9% to HK $22.40, China Vanke gained 2.9% to HK $4.69, and Longfor Group Holdings advanced 4.2% to HK $9.14.