European Shares Surge Amid Economic Stimulus

By Pranav Kashyap and Shashwat Chauhan

(Reuters) – European shares jumped on Thursday, with China-exposed stocks such as luxury retailers and mining companies outperforming due to aggressive Chinese economic stimulus. Chip stocks, particularly after U.S. firm Micron’s strong revenue forecast, also saw gains.

The pan-European STOXX 600 index closed 1.3% higher at 525.61 points, marking an all-time closing high and nearing the intraday record high.

Chinese leaders have committed to “necessary fiscal spending” to meet a 5% economic growth target, acknowledging new challenges and raising expectations for additional stimulus on top of measures already announced this week.

Tim Graf, managing director and head of macro strategy for EMEA at State Street Global Markets, commented, “This is a very positive market reaction that will probably fade with time as challenges surrounding Chinese demand will take time to resolve.”

Luxury firms like LVMH and Hermes saw gains of about 9%, while a gauge of ten of Europe’s largest luxury brands rose 6.5%. Mining stocks increased by 4.3% on high base metal prices.

Europe’s technology sector climbed 3% as semiconductor shares surged after Micron Technology forecasted higher-than-expected revenue driven by AI demand.

Conversely, heavyweight energy shares decreased by 3% as crude oil prices fell over 2% due to reports that Saudi Arabia plans to abandon its price target in anticipation of increased output, with OPEC+ likely to raise production in December.

In Switzerland, the central bank reduced interest rates by 25 basis points, following the approaches of the European Central Bank (ECB) and U.S. Federal Reserve, and has indicated the possibility of more rate cuts as inflation eases.

Policy doves at the ECB are gearing up to advocate for interest rate cuts next month, influenced by weak economic data, though they may face resistance from more conservative members. Deutsche Bank has updated its forecast for a quicker ECB rate-cutting cycle, expecting consecutive quarter-point cuts beginning in December.

Swatch Group jumped 12.1% following reports of potential delisting, while Germany’s Commerzbank gained 6.9% after reaffirming its strategy through 2027 and committing to payout ratios exceeding 90% for the years 2025 to 2027.

On the other hand, H&M dropped 4.6% after the fashion retail giant canceled its margin target for 2024.