Written by Millan Chauhan

The People’s Bank of China announced a series of measures to support the economy, including cutting a key lending rate by 0.3%, the biggest reduction since 2016. The goal is to stabilise the property market and boost consumer spending to achieve a 5% annual GDP growth target. In addition to rate cuts, the bank lowered the minimum deposit requirement for second home purchases from 25% to 15%. These measures are expected to create a more positive outlook for the economy, which has struggled in recent years. The news caused a strong reaction in the stock market, with the MSCI China Index gaining +16.1% in GBP terms last week.

The positive news from China and its potential to boost Chinese consumer confidence also benefited luxury brands like LVMH and Burberry, as Chinese consumers tend to spend heavily on high-end goods. This momentum also helped the broader MSCI Europe ex-UK Index gain +2.4% in GBP terms, which has a modest exposure to luxury goods.

Meanwhile, economic activity in Europe continued to slow, as shown by a drop in the Eurozone’s Purchasing Managers’ Index (PMI), which measures business conditions. A PMI reading below 50 signals a contraction, and this month’s score of 48.9 suggests economic activity is declining. Inflation in France and Spain also came in lower than expected, increasing the chances of a rate cut by the European Central Bank at its October meeting.

In the US, the Commerce Department reported that core personal consumption expenditure (PCE), the Federal Reserve’s preferred measure of inflation, rose by only 0.1% in August, suggesting a slight easing of inflationary pressures.

 

Any opinions stated are honestly held but are not guaranteed and should not be relied upon. 

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products. 

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments. 

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 30th September 2024.

© 2024 YOU Asset Management. All rights reserved.