ROME: European stocks climbed Thursday, tracking gains in Asian and U.S. markets overnight as investors appeared to latch onto the new round of stimulus from China’s central bank.
The Stoxx Europe 600 SXXP, +2.83% rose 2.2% to 357.72 as all sectors advanced.
As European trading got underway, the Shanghai Composite Index SHCOMP, +5.34% moved up 5.3%. Before that, Hong Kong’s Hang Seng Index HSI, +3.60% gained 2.9%, with equity investors getting their first chance to respond to the decision by the People’s Bank of China to inject 140 billion yuan ($21.8 billion) into the financial system.
“Investors are cheering the news from the People’s Bank of China. The PBOC is combating the uncertainty by turning on all of its cylinders,” said Naeem Aslam, chief market analyst at AvaTrade, in a note.
“The question is if they can do more? Yes, for sure, they can bend the liquidity easing arm as much as they desire,” he said.
Aslam noted China’s central bank has already cut its benchmark interest rates and cut the reserve ratio requirement for major banks, “which itself works out another massive liquidity as the banks could use that cash to lend.”
U.S. stocks on Wednesday rallied after comments from New York Fed President William Dudley that the case for an interest rate increase in September is “less compelling”, given recent international developments and volatility in financial markets. The S&P 500 SPX, +3.90% and the Dow Jones Industrial Average DJIA, +3.95% posted their strongest percentage gains since 2011.
