Europe open: Stoxx 600 inches closer to record high after Chinese stimulus

European markets were rangebound in early trading on Monday with stocks trading at their highest levels in four weeks.

The Stoxx 600 was up 0.16% at 525.83, with most indices across the continent registering mild gains or losses early on. The only time that the pan-European benchmark index has traded higher was on 27 September when it closed at a record high of 528.08.

The FTSE 100 was outperforming other continental markets as its heavyweight mining sector received a boost from yet more stimulus measures in China as the country’s central bank cut benchmark lending rates as expected.

The People’s Bank of China said on Monday that it was cutting its two benchmark lending rates by 25 basis points.The one-year and five-year loan prime rates were reduced from 3.35% and 3.85% to 3.10% and 3.6%, respectively, in line with market expectations.

“These benchmarks are used to price consumer loans and mortgages, and the idea is that the move will encourage lending and spending and help mend the ailing property market. There are also hints from authorities that there may be further cuts to the amount banks need to hold in reserve, to try and boost lending further,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“With the taps of support being turned on more fully there is renewed hope that this approach of throwing the kitchen sink at the problem will help the economy reach growth targets.”

The economic data calendar was relatively quiet on Monday, with the only major release of the day being Germany’s producer price index for September. Wholesale prices were 0.5% lower during the month, their first fall in seven months, while the annual rate of deflation picked up to 1.4% from 0.8% previously.

Market movers

JDE Peet's was a high riser on the Stoxx 600 after news that investor JAB is to buy Mondelez’s stake in the coffee, tea and hot chocolate maker for €2.2bn. The Douwe Egberts owner also announced that seasoned FMCG veteran Rafael Oliveria would be joining the company as its new chief executive.

Mining stocks were in demand in London, including Fresnillo, Glencore, Antofagasta and Anglo American, following the rate cut in China.

The news also boosted shares in European fashion brands such as Burberry, Hermes and LVMH on hopes that cheaper loans could be a catalyst for luxury spending in China.