Europe midday: Stoxx, DAX hit new highs as China stimulus boosts sentiment

European shares powered to fresh intra-day highs on Friday after strong gains in Asia overnight on the back of Chinese stimulus measure to boost the world’s second-biggest economy.

The pan-regional Stoxx 600 index was up 0.28% in early deals to 527.06 after hitting a record 526.72. Germany's DAX did likewise, up 0.93% to 19,400 and hitting a new record of 19,403 during the session.

China's central bank on Friday lowered interest rates and injected liquidity into the banking system as authorities tried to fire the struggling economy back towards this year 5% growth target.

The move follows the announcement of the biggest stimulus measure since the Covid-19 pandemic. Reports overnight said China plans to issue special sovereign bonds worth about 2 trillion yuan this year as part of fresh fiscal stimulus.

"European markets are on the rise in a session that will struggle to replicate the kind of fireworks that saw yet another bout of gains throughout Asian markets," said Scope Markets analyst Joshua Mahony.

"The week has been dominated by talk of Chinese stimulus, as the People's Bank of China and Chinese government finally appear to have stepped up with a raft of measures aimed at resuscitating a stuttering economy. Whether this will be enough to fix the huge structural issues and a lack of demand for the hugely oversupplied housing market remains to be seen."

Traders will also have eyes on the US Core Personal Consumption Expenditure readout expected later in the day. Analysts have pencilled in a rise between 0.1% and 0.2% for August.

“Any significant rise above that range could dampen the prospects of further rate cuts by the Federal Reserve, whose current forecast suggests another half point reduction by the end of 2024,” said Hargreaves Lansdown analyst Derren Nathan.

In regional economic news, confidence eased across the Eurozone in September, an official survey released on Friday showed, as the bloc’s economic recovery struggled to take hold.

The European Commission’s latest Economic Sentiment Indicator fell 0.3 points to 96.2, reversing much of August’s surprise 0.6 uplift.

Meanwhile, the jobless rate in Germany was unchanged in September for the fourth straight month, remaining at the highest levels since mid-2021.

As expected by economists, seasonally adjusted unemployment was steady at 6.0% this month, a level which it stayed at since June, according to the Federal Employment Agency.

However, the number of people claiming unemployment benefits increased more than expected, rising by 17,000 to 2.82m. Analysts had expected growth of 12,000, after 2,000-person increase in August.

Brent Crude fell again to $71.45 per barrel as speculation Saudi Arabia had abandoned its $100 price target ahead of planned production increases later in the year continued to hit sentiment.

In equity news, shares in Moncler surged as the luxury goods maker’s chief executive Remo Ruffini struck a deal with LVMH which will see LVMH partner with Ruffini to make an expanded investment in the Italian company and a seat on the board.

LVMH shares also gained on the news, while fellow luxury stock Kering along with high-end fashion brands Hugo Boss and Brunello Cucinelli also rose on the China stimulus measures.

Insurance and investment group Prudential rose as the company expanded further into South East Asia through a strategic partnership with Bank Syariah Indonesia.

Reporting by Frank Prenesti for Sharecast.com