Market Outlook Overview

By Ankur Banerjee

Chinese stocks rebounded on Thursday, recovering from a slump as investors look forward to a Saturday press briefing for insights on fiscal stimulus measures aimed at reviving the Chinese economy.

European stocks may experience a slight upward movement, especially among China-related miners and luxury brands, which have faced skepticism regarding stimulus measures. Futures indicate a modestly higher opening for European markets.

In the Far East, investor sentiment was lifted when the People's Bank of China initiated a 500 billion yuan facility to invigorate capital markets, although the markets remain volatile.

The blue-chip index rose 3.5% after a significant 7% drop on Wednesday, marking its largest one-day decline since the pandemic as investors awaited further details on stimulus and measures to enhance growth.

Hong Kong's Hang Seng index increased by 4%, becoming the second-best performing major stock market in Asia this year with a 25% gain since stimulus was announced on September 24.

Much attention will be directed towards a finance ministry press conference on Saturday, which may outline fiscal stimulus strategies. This is a crucial moment for markets, especially after significant monetary stimulus measures were introduced in late September aimed at reviving the struggling property market.

There is cautious optimism among investors who are expecting large-scale fiscal actions soon; however, analysts warn that unmet expectations could lead to a substantial stock pullback.

Additionally, investor focus will shift to U.S. inflation data expected later today, as traders have moderated their expectations regarding steep interest rate cuts from the Federal Reserve following strong job data from last week. A strong inflation report could further diminish these rate cut expectations.

The U.S. dollar remains strong, resting at a two-month high due to these changing rate cut forecasts.

Key Developments Influencing Markets:

• Economic events:
  • Germany’s retail sales for July
  • U.S. inflation data for September

(By Ankur Banerjee; Editing by Christopher Cushing)