Economy
European shares log weekly gains on China optimism, hopes for pause at ECB
© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 14, 2023. REUTERS/Staff/File Photo
By Bansari Mayur Kamdar and Shashwat Chauhan
(Reuters) -European shares marked weekly gains on Friday, as better-than-expected Chinese data lifted luxury firms while investors took comfort from signs that the European Central Bank (ECB) is nearly done raising interest rates.
The pan-European rose 0.2% to close at a five-week high, with luxury, mining and autos leading the sectoral gains.
French luxury names like Kering (EPA:) and LVMH climbed 1.8% and 2.5% after data showed China’s factory output and retail sales grew at a faster pace in August.
European stocks recorded their biggest percentage gain in six months on Thursday after the ECB raised its key interest rate to a record high of 4%, but with the euro zone economy in the doldrums, signalled that the hike was likely to be its last.
However, policymakers on Friday said the central bank will keep interest rates high for an extended period and could even raise them again if needed, pushing back on some market bets that euro zone rates will start falling as soon as next spring.
“It was never expected that the ECB would call the end of the hiking cycle,” said Bas van Geffen, senior macro strategist at Rabobank.
“For one, the inflation outlook remains far too uncertain to say this with confidence, and pre-emptively calling it quits could cost the ECB its credibility.”
The STOXX 600 added 1.6% for the week, with miners the top performers.
Euro zone finance ministers agreed that fiscal policy should be restrictive next year to help the ECB curb inflation, while balancing the need for investment.
The focus will shift to central bank meetings elsewhere, with the U.S. Federal Reserve and the Bank of England set to announce their rate decisions next week.
Among individual stocks, Sweden’s H&M (ST:) shed 7.4% on reporting flat sales in its most recent quarter, lagging expectations as the fashion group struggles to attract customers while the cost-of-living crisis drags on.
Games Workshop Group jumped 10.6% after the miniature wargame maker said it expects to post a higher quarterly profit before tax.
Dutch suppliers of semiconductor giant TSMC such as ASML, ASMI and BE Semiconductor Industries (AS:) fell by 3.5% to 6.6% after a Reuters report showed the Taiwanese firm has told its major suppliers to delay their deliveries of high-end chipmaking equipment.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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