European shares ended flat on Monday as gains driven by optimism around China’s stimulus measures to revitalise its economy fizzled out, while Danish drugmaker Novo Nordisk’s shares touched record highs.
The pan-European STOXX 600 index held steady at 457.96 points at close after touching near four-week highs earlier in the day.
Europe’s technology sector gained 0.5% as shares of Dutch semiconductor equipment maker ASML rose 0.8%.
Miners finished up 0.6% after rising nearly 2% intraday, as iron ore futures rallied on optimism over top steel producer China’s policy support for its struggling property sector. [IRONORE/]
China stepped up measures to boost the country’s faltering economy, with top banks paving the way for further cuts in lending rates and sources saying Beijing plans further action, including relaxing restrictions on home purchases.
“The slowdown that we’ve seen in China and this redirection away from consumer stimulation and to a more technical and high added value economy is taking a lot more time than people anticipated,” said Michael Browne, chief investment officer at Martin Currie, part of Franklin Templeton.
Further contractions in the labor market are likely to be a double-edged sword for investors as they ease some inflationary pressures while weighing on consumer spending.
Total consumer spending rose slightly more-than-expected in August, while the savings rate fell to its lowest level since November 2022, the Commerce Department said on Thursday.
Consumers will use up their excess savings accumulated during the pandemic “very soon,” said Jake Jolly, senior investment strategist at BNY Mellon (NYSE:) Investment Management, which is underweight equities and expects the U.S. economy to be headed for a recession .
“The real question is how long can consumer spending surprise on the upside,” he said, adding that bonds continue to look more attractive amid yield growth that has risen to over 4%.
Overall, consumer spending growth will slow to 0.9% in 2024 from 2.3% in 2023, said Gregory Daco, chief economist at accounting giant Ernst & Young, due to higher interest charges, fewer available savings and student loan payments. He said the economy will see below-trend growth for several quarters.
Separately, according to sources and a document seen by Reuters, embattled Chinese developer Country Garden has won approval from its creditors to extend payments for an onshore private bond, in a major relief for the firm and the crisis-hit property sector.
China-exposed industrials rose 0.1%, while automakers gained 0.3%.
Luxury heavyweight LVMH slipped 0.4%, paring initial gains and weighing on the STOXX 600.
Novo Nordisk rose 0.7% to hit a record high intraday after the Danish drugmaker launched its weight-loss injection Wegovy in Britain. Novo, with a market capitalisation of $424.7 billion, unseated LVMH as Europe’s most-valuable listed company on Friday.
Rising European bond yields also kept a lid on gains
German inflation and euro zone gross domestic product numbers due later in the week will act as major tests of the European economy’s health ahead of the European Central Bank’s policy meeting on Sept. 14.
European stocks ended the last week of August higher, erasing some losses during the month as recent economic data fuelled expectations that major central banks were nearly done with their interest rate hikes.
Friday’s data showing a jump in U.S. unemployment rate cemented bets that the Federal Reserve will keep interest rates unchanged at its policy meeting later this month.
U.S. markets are closed on Monday for Labor Day.
Telecom Italia (TIM) advanced 3.5% after Barclays upgraded the stock to “equal-weight” from “underweight”.