CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

A wave of stimulus follows investors into Q4

07:50 27 September 2024

China stimulus boosts markets, as French CPI sours

This time last week, the main focus was the Fed and its 50bp rate cut. This was considered a boon for stock markets and risk appetite. However, the Fed-driven rally has been left in the dust by China’s week-long give away to markets, with rate cuts, help for the property sector, a fund to buy domestic equities and the promise of fiscal stimulus and more support for the economy. This is exactly what the market was looking for. It is also the trigger for a broadening of the equity market rally beyond the US tech sector. Weaker French CPI also raises the prospect of an ECB rate cut in October, thus a wave of stimulus seems to be following investors as we move towards Q4.

The stock rally broadens out

Start investing today or test a free demo

Open account Try demo Download mobile app Download mobile app

It's been another strong day for Chinese shares, the Hang Seng is higher by 2.33%, and the CSI 300 index is higher by more than 3.5%. The stimulus package from Beijing has helped Chinese shares to reach 1 trillion-yuan turnover for the third consecutive day, and this massive boost in volume has meant that the Shanghai stock exchange has experienced problems yet again. Even so, China’s massive stimulus package has unleashed massive animal spirits. The CSI 300 is higher by 14.7% in USD terms in the last 5 days, the Hang Seng is higher by 11.5%. European stocks have also benefited, although the gains are much milder for Europe compared with Asia. The Eurostoxx 50 index is higher by 1.8% in the last 5 days, however, the FTSE 100 is down by 0.5% on a USD basis, as the energy sector takes a hit from volatility in the oil price.

China plays catch up as region gets a boost from Beijing

The scale of China’s stimulus plan is unprecedented, as Beijing has usually avoided monetary and fiscal support for the economy. The US-style measures announced this week, has also helped Chinese and Hong Kong shares eclipse US shares. The S&P 500 is higher by 0.56%, the Nasdaq is higher by 0.98% in the past 5 days, and the Dow Jones is the laggard, rising by 0.3%. It’s been a strong Q3 for US stocks, the S&P 500 is higher by 5% so far in Q3, and the Dow Jones is up by more than 7%. However, trading is a global game, and the strong positive reaction to the Chinese stimulus could see a wave of capital head to Asia, if this rally is only getting started.

Golden Dragon Index flies high

US-Listed Chinese shares have also had a blistering rally. The Nasdaq’s Golden Dragon Index, which includes US-listed Chinese tech shares, has surged this week and it is at its highest level since May. Volume and interest in the Golden Dragon Index has also soared, and daily volume is at its highest level for more than a year. The index is higher by more than 18% so far this week.

Why UK indices have missed out on the rally

As we mentioned on Thursday, UK indices have mostly missed out on the global market rally this week. This is an opportunity missed for the UK indices, and the FTSE 100 is underperforming other European and US indices YTD. Europe’s luxury names and car brands have also been favored by investors this week. A slowdown in European CPI for September, could boost expectations of another ECB rate cut in October, which may help European equities as we move towards Q4.

The Brent crude oil price has experienced a 4% decline in the past 5 days, driven by a few factors including reports that Saudi Arabia had abandoned its $100 oil price target, more supply coming on board from Libya and a potential ceasefire between Israel and Lebanon. This has weighed heavily on BP and Shell. They are the two weakest performers on the FTSE 100 in the last 5 days, and they are lower by 8% and nearly 7% respectively.

British Land returns to the FTSE 100

It's also worth noting that British Land will return to the FTSE 100, after Darktrace leaves the index as it is being taken private. It’s a sad day that another tech firm is leaving the FTSE 100, the fact that it is being replaced by British Land, a property development company, says a lot about the make up of the British index, and its dearth of tech firms. We can make fantastic tech firms in the UK, but we seemingly can’t keep them.

Yen rallies as new Japan PM announced

Elsewhere, in Japan the Nikkei has now erased all losses since the July rate cut. The focus on Friday has been politics, Japan will get a new Prime Minister, Shigeru Ishiba, after the Liberal Democratic Party leadership contest. His rival advocated looser monetary policy, which could have clashed with the BOJ’s plans to normalize monetary policy and hike interest rates. However, Ishiba is considered neutral for the current policy path. This has weighed on USD/JPY, and the yen has strengthened. USD/JPY is currently down by 2% on the back of this news and is trading around 144.

US economic data in focus

US economic data is also in focus on Friday. Personal income and savings data will be released at 1330 BST, however, core PCE data for August will be key. Bloomberg expects personal income to tick higher, but for spending to have eased to 0.3% in August, compared to a 0.5% gain in July. This could boost the personal savings rate to 5.1% for August. The core PCE index is expected to tick higher to a 2.7% YoY rate, up from 2.6% in July.  We expect core PCE to be in line with expectations, or even a touch lower. This will justify the Fed’s 50bp rate cut last month. Added to this, the increase in the savings rate and the reduction in spending, could show that the Fed’s move was prudent. Consumer confidence is also worth watching, will the Fed rate cut have boosted confidence, which has been below the 5-year average in recent months?

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

Written by

Kathleen Brooks

Back
Xtb logo

Join over 1 Million investors from around the world

We use cookies

By clicking “Accept All”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.

This group contains cookies that are necessary for our websites to work. They take part in functionalities like language preferences, traffic distribution or keeping user session. They cannot be disabled.

Cookie name
Description
SERVERID
userBranchSymbol cc 2 March 2024
adobe_unique_id cc 1 March 2025
test_cookie cc 1 March 2024
SESSID cc 9 September 2022
__hssc cc 1 March 2024
__cf_bm cc 1 March 2024
intercom-id-iojaybix cc 26 November 2024
intercom-session-iojaybix cc 8 March 2024

We use tools that let us analyze the usage of our page. Such data lets us improve the user experience of our web service.

Cookie name
Description
_gid cc 9 September 2022
_gat_UA-22576382-1 cc 8 September 2022
_gat_UA-121192761-1 cc 8 September 2022
_ga_CBPL72L2EC cc 1 March 2026
_ga cc 1 March 2026
AnalyticsSyncHistory cc 8 October 2022
af_id cc 31 March 2025
afUserId cc 1 March 2026
af_id cc 1 March 2026
AF_SYNC cc 8 March 2024
__hstc cc 28 August 2024
__hssrc

This group of cookies is used to show you ads of topics that you are interested in. It also lets us monitor our marketing activities, it helps to measure the performance of our ads.

Cookie name
Description
MUID cc 26 March 2025
_omappvp cc 11 February 2035
_omappvs cc 1 March 2024
_uetsid cc 2 March 2024
_uetvid cc 26 March 2025
_fbp cc 30 May 2024
fr cc 7 December 2022
muc_ads cc 7 September 2024
lang
_ttp cc 26 March 2025
_tt_enable_cookie cc 26 March 2025
_ttp cc 26 March 2025
hubspotutk cc 28 August 2024

Cookies from this group store your preferences you gave while using the site, so that they will already be here when you visit the page after some time.

Cookie name
Description
personalization_id cc 7 September 2024
UserMatchHistory cc 8 October 2022
bcookie cc 8 September 2023
lidc cc 9 September 2022
lang
bscookie cc 8 September 2023
li_gc cc 7 March 2023

This page uses cookies. Cookies are files stored in your browser and are used by most websites to help personalise your web experience. For more information see our Privacy Policy You can manage cookies by clicking "Settings". If you agree to our use of cookies, click "Accept all".

Change region and language
Country of residence
Language