Stocks rise on China stimulus; Outlook for Europe darkens – Reuters

LONDON, July 25 (Reuters) – Global equities rose on Tuesday, buoyed by a rally in Asia, where the yuan rallied after China pledged to step up support for its sputtering economy, while signs of a slowdown in European growth dented the euro.

China’s top leaders pledged late Monday to provide more aid to the economy, which is struggling to sustain a post-COVID recovery, signaling more to come for the real estate sector.

The MSCI All-World Index (.MIWD00000PUS) rose 0.2%, boosted by gains in the Chinese stock market, where the mainland index (.SSEC) rose 1.9% and Hong Kong equities (.HSI) rose 3%, thanks to a rise in real estate stocks that had plunged on debt repayment concerns.

But the positive momentum did not spill over to Europe, where equities and the euro struggled to stay in positive territory as recession concerns resurfaced after regional surveys the day before showed that business activity had contracted much more than expected in July.

“There are a few things. First, as far as European and US traders go, there are almost bigger fish to fry in this part of the world, with the Fed tomorrow night and then the ECB on Thursday,” said Michael Brown, a market strategist at TraderX.

“The second point is that this week, and certainly since Monday morning, we’ve seen a major turnaround in the data coming out of Europe. The PMIs have been, quite frankly, disastrous,” he said.

Monday’s Purchasing Manager Indexes fell below expectations for the euro-zone as a whole, as well as major economies such as France and Germany, prompting traders to rethink what the European Central Bank might signal in terms of its interest rate outlook when it meets on Thursday.

Tuesday’s macroeconomic releases showed evidence of a deterioration in business confidence in Germany this month, and eurozone loan demand hit a record low in the second quarter as rising interest rates took their toll, according to an ECB survey.

The Federal Reserve will publish its decision on monetary policy on Wednesday.

Markets are expecting rate hikes of 25 basis points from both the Fed and the European Central Bank this week, but pricing otherwise diverges from policymakers’ rhetoric, meaning a lot of focus will be on their tone and outlook.

EUROPE MINERS APPROACH CHINA

The European STOXX 600 (.STOXX) was up 0.2% on the day, led in part by mining stocks, which rallied on China’s signal that it intends to support the economy. (.SXPP).

Consumer group Unilever (ULVR.L), which makes Dove soap and Ben & Jerry’s ice cream, rose 5% after beating underlying quarterly revenue growth forecasts, leaving the FTSE 100 (.FTSE) positive.

In currency terms, the Chinese yuan rose 0.7% against the dollar to 7.1386 after the stimulus, aided by state-owned banks selling dollars onshore and offshore in Asia.

The dollar index, which measures the performance of the US currency against six others, fell 0.1% to 101.34.

The Australian dollar, which serves as a liquid proxy for the yuan, rose 0.5% to $0.677 as the euro struggled to break above two-week lows. It was last up 0.1% to $1.1076.

The Japanese yen rose slightly against the dollar, which fell 0.2% to 141.27. Investors appear to be skeptical about whether the Bank of Japan, which meets on Friday, will change its policy of keeping lending rates at zero.

In the US, Microsoft (MSFT.O), Google parent Alphabet (GOOGL.O), Visa (VN), General Electric (GE.N), chipmaker Texas Instruments (TXN.O) are among the heavyweights reporting in the coming days.

On Wall Street, the Dow Jones (.DJI) closed for its 10th day on Monday, marking the longest streak of daily gains since 2017. This year’s tech-led rally finally appears to be spreading across the entire market, and investors are bullish on this week’s earnings reports.

Morgan Stanley’s Mike Wilson, probably the most prominent stock bear this year and whose call for a lower S&P 500 was based on poor earnings, said Monday, “We were wrong.”

In the energy market, both Brent and US crude oil futures were flat that day, at $82.71 a barrel and $78.74 a barrel respectively.

Our Standards: The Thomson Reuters Principles of Trust.

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