European stocks began the week on a subdued note, hindered by a series of profit warnings from automakers that overshadowed positive news from China’s economic stimulus measures. The continent’s Stoxx 600 index struggled for traction, impacted by notable declines in several automaker stocks. Jeep manufacturer Stellantis NV saw a significant drop of 7.4% after revising its profit margin forecast downward. Aston Martin Lagonda Global Holdings Plc experienced a sharp 14% slump, while Volkswagen AG issued its second profit warning in just three months, contributing to the overall negative sentiment. Meanwhile, U.S. equity futures remained within narrow trading ranges.
In contrast, the mood in China was notably more optimistic, with the CSI 300 Index surging as much as 9.1%, marking its largest single-day gain since 2008. This rally followed the announcement that three of China’s major cities had relaxed homebuyer restrictions, coupled with actions from the central bank to lower mortgage rates. These measures were part of a broader economic stimulus package unveiled last week.
Matthew Haupt, a portfolio manager at Wilson Asset Management, noted, “The government seems more committed to implementing measures to revitalize the economy, which appears more promising than past attempts.” He added, “The rally might have more sustained momentum this time, and we are awaiting further announcements to bolster our confidence in the trajectory of China’s economy and stock market.
The positive developments in China also benefited European mining stocks, with Rio Tinto Group leading the sector’s gains. Meanwhile, the U.S. dollar and Treasury yields remained stable.
Looking ahead, traders are expected to closely monitor Eurozone inflation and manufacturing data, along with the U.S. jobs report set for release on Friday. These indicators will play a crucial role in shaping expectations for potential interest rate cuts by the Federal Reserve as the year comes to a close.
Political dynamics in Europe also pose additional risks, particularly in Austria, where traditional political parties have pledged to prevent the far-right Freedom Party from forming a government following its historic victory in the recent national elections.
Additionally, a slump in Japanese stocks weighed on the MSCI Asia Pacific index, as investors were caught off guard by Shigeru Ishiba’s victory in the ruling party’s leadership race. Ishiba’s administration is expected to maintain continuity in economic, monetary, and foreign policy, with Katsunobu Kato, a former government spokesperson, appointed as finance minister, according to local media reports. The yen also gave back some gains from the previous session.
Amid these developments, tensions in the Middle East escalated further following Israel’s killing of Hezbollah leader Hassan Nasrallah in Beirut. As a result, oil prices rose on Monday, with market participants closely monitoring potential Iranian responses and reacting to China’s stimulus measures.
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