European stocks and U.S. equity futures experienced a notable rally on Thursday, buoyed by gains in Asia following China’s commitment to fiscal stimulus and an uptick in technology shares.
The Stoxx 600 index in Europe rose by 1%, while Nasdaq 100 futures advanced following a robust revenue forecast from Micron Technology Inc., which sparked a late-day surge in its stock. Overall, Asian equities surged approximately 2%, with U.S. Treasuries and the dollar remaining stable.
Details regarding the scale of China’s planned fiscal spending were sparse, but the announcement enhanced risk appetite and improved the outlook for European industries closely tied to the Chinese economy. Analysts had previously raised concerns about whether earlier monetary stimulus would be adequate given worries over deflation and sluggish consumer demand.
“Does it change the global story? We are not sure, but for now it’s surely good for the rest of the world,” said Kenneth Broux, a strategist at Societe Generale SA. “Individual stock names in Europe are up as people are betting the Chinese consumer will go out and spend, including on luxury items.”
According to Bloomberg, China is considering a capital injection of up to 1 trillion yuan (approximately $142 billion) into its largest state banks to enhance their ability to support the struggling economy. This move would mark the first capital infusion into major banks since the global financial crisis of 2008.
Federal Reserve Insights
In the U.S., futures for the S&P 500 rose by 0.7% as traders awaited a pre-recorded address by Federal Reserve Chair Jerome Powell at the 10th annual U.S. Treasury Market Conference.
On Wednesday, Federal Reserve Governor Adriana Kugler expressed strong support for the central bank’s recent interest rate cut, suggesting that further cuts could be warranted if inflation continues to decline as anticipated.
At the end of the week, the Fed’s preferred inflation metric and a report on consumer demand are expected to validate last week’s aggressive interest rate cut, reinforcing Powell’s assertion that the economy remains robust.
Commodity Market Movements
In commodity markets, oil prices fell for a second consecutive day amid reports that Saudi Arabia is contemplating increasing production. Additionally, factions in Libya have reached an agreement that could pave the way for a resumption of crude oil production.
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