Europe midday: Stoxx winds back morning losses; Valmet surges

25th Sep 2024 11:14

(Sharecast News) - European shares were flat on Thursday as the rally from China's stimulus measures ran out of steam, even after the country's central bank released more funds for financial institutions.

The pan-regional Stoxx 600 index pared morning losses to sit 0.09% higher at 520. Markets had bounced on Tuesday on the package of rate cuts from the People's Bank of China aimed at boosting the country's flagging economy.

Overnight the bank slashed its medium-term lending facility from 2.3% to 2.0%, marking the largest reduction of interest rates for one-year loans to financial institutions in history.

Just one day after unveiling a list of measures designed to stimulate demand and put the economic recovery back on track, the PBoC said it was also lending 300bn yuan ($43bn) to financial institutions.

The move, which was widely expected following comments from PBoC governor Pan Gongsheng the previous day, follows a raft of cuts to reserve requirements and lending rates, including for existing home loans.

"The problem is, the stimulus measures will take time to show in the economic data," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"And more worryingly, they won't do much to fix the country's deepest issues - they won't reverse local governments' heavy debt burden, China's aging population, and will hardly boost the demand-led growth."

Sentiment was also dented by a slump in US consumer confidence, with the conference board survey falling to 98.7 in September from 105.6 in August.

"Unfortunately, this feeds back into the narrative around a potential slowdown in the jobs market, with the survey seeing a decline in the percent of consumers seeing jobs as plentiful, as the 'hard to get' figure rose," said Scope Markets analyst Joshua Mahony.

"This brought fresh concerns over a potential surge in US unemployment, while we saw a rise in the number of consumers that believed the US was already in a recession. For markets, the prospect of a hard landing brings fresh concerns over the direction of earnings, although the rising expectations of a 50bp November cut from the Fed does help to counterbalance some of the risk-off consequences."

In equity news, paper industry technology maker Valmet led the gainers with a 9% rise after receiving a €1bn order from a pulp mill in Brazil.

Shares in SAP were down nearly 4% on reports that the German enterprise software giant, among others, is being investigated for potential price-fixing on government contracts.

Reporting by Frank Prenesti for Sharecast.com