MW: European stocks charge higher as China stimulus talk heats up
European stocks rose by the most in nearly a month Tuesday, gaining alongside other global equity markets on hopes Beijing will embark on more stimulus after China’s economy grew at the slowest pace in 25 years.
The Stoxx Europe 600 SXXP, +2.09% was driven up by 2% to 335.07, on track for its best showing since a 2.7% advance on Dec. 23, according to FactSet data. All sectors were higher Tuesday, fronted by gains in shares of basic materials SXPR, +5.76% and consumer services companies.
Topping the Stoxx Europe 600 was Ocado Group PLC OCDO, +15.85% rallying 17% on speculation that U.S. e-commerce heavyweight Amazon.com Inc. AMZN, -3.85% is interested in bidding for the British online grocer.
China: Gains in European stocks followed those seen in Asia after China posted fourth-quarter growth of 6.8%, the slowest rate of expansion since 2009. Full-year 2015 gross domestic product growth was 6.9%, the weakest pace of expansion in 25 years. After the report, the Shanghai Composite Index SHCOMP, +3.22% turned higher and closed up 3.2%. In Hong Kong, the Hang Seng Index HSI, +2.07% gained 2.1%.
“So China is in a funk because of the huge debt built up in 2008 onwards as it fought off the effects of the global financial crisis, but markets are excited because China may instigate stimulus to counteract slowdown fears,” said Simon Smith, chief economist at FxPro, in a note.
“That can only mean more rate cuts or reductions in the required reserve ratio for banks. There is also scope for the currency to take some of the strain, but not yet, given the recent developments and especially on the off-shore yuan,” he added.
As China is a major buyer of metals and other commodities, mining shares put in a strong performance Tuesday. Iron ore and platinum producer Anglo American PLC AAL, +11.07% tacked on 8.6%, Sweden’s Boliden AB BOL, +3.72% registered a 4% rise, and BHP Billiton PLC BLT, +5.73% BHP, -6.87% BHP, +0.68% was shoved 4.5% higher.
The commodities-heavy FTSE 100 UKX, +1.89% in London was up 1.6% to 5,872.42.
In Frankfurt, the DAX 30 DAX, +2.06% gained 1.9% to 9,702.92, and France’s CAC 40 PX1, +2.48% notched a 2.1% rise to 4,278.52.
Italian stocks were more subdued, with a continued selloff in Italian banks limiting the FTSE MIB FTSEMIB, +0.80% to a gain of 0.1% at 18,710.40. Banca Monte dei Paschi di Siena SpA BMPS, -11.95% , Intesa Sanpaolo SpA ISP, +1.43% and other banks were temporarily suspended from trading due to rapid, large losses.
Movers: Novozymes A/S NZYMB, -11.82% NVZMY, -4.11% shares sank 12% after the Danish maker of enzymes forecast “moderate organic sales growth” in 2016 and posted lower-than-expected fourth-quarter profit.
Unilever PLC ULVR, +2.01% popped up 2% after the consumer products maker posted higher fiscal-year sales. Separately, the resignation of Sean Gogarty as head of the spreads division sparked further speculation the slow-growing business could eventually be sold.
Total SA FP, +3.26% picked up 1.9% although the French oil major’s chief executive said the company is likely to report a 20% fall in 2015 net profit because of sliding oil prices.
