by Diana Mandia

(Reuters) – European stock markets ended higher on Friday, with the exception of London, boosted by Beijing’s latest economic stimulus measures, reassuring US economic data and hopes of further reductions in interest rates from the ECB.

In Paris, the CAC 40 gained 0.39% to 7,613.05 points. In Frankfurt, the Dax gained 0.38% and in London, the FTSE 100 on the other hand dropped 0.32%, investors having had to digest an unexpected increase in retail sales in September

The EuroStoxx 50 index ended with a gain of 0.74%, the FTSEurofirst 300 increased by 0.23% and the Stoxx 600 gained 0.19%.

Over the week, the Stoxx 600 gained 0.56% and the CAC 40 0.46%.

Announcements from China’s central bank to boost financial markets, at a time when stimulus measures for the world’s second-largest economy are under scrutiny, provided further support to European stock markets on Friday, particularly to the basic resources and luxury sector, which has recently been hit by concerns over growth in this key market.

Weak Chinese economic data, however, prompted investors to remain cautious, as the Asian giant’s GDP grew in the third quarter at its slowest pace since the start of 2023.

European stock indices also benefited from the prospect of an acceleration in the rate cut by the European Central Bank (ECB), which decided on Thursday on the third reduction in borrowing costs since June and which, according to sources, forecasts a further decline in December.

According to François Villeroy de Galhau, governor of the Banque de France, inflation in the euro zone, which continued to decelerate in September, now risks falling below the institution’s objective of 2%.

“At this stage, despite weak economic growth, the ECB does not see any risk of recession. While total inflation is expected to be at its target in 2025, the ECB knows that by lowering its key rates it will contribute to support activity”, notes LBP AM, which expects Frankfurt to lower borrowing costs again in December before reducing them another three times during the first half of 2025.

The markets are also digesting the data on retail sales in the United States published on Thursday, well above estimates, before another busy week of company results and indicators such as the PMI of activity in the euro zone.

In the United States, investors’ inflation expectations rebounded in October as the chances of Donald Trump’s election following the November 5 vote strengthened, according to market data used in particular by the Reserve. federal government (Fed) to gauge whether its inflation objective has been achieved.

VALUES

The positive sentiment on China boosted the luxury sector which suffered earlier this week from the disappointment with LVMH’s results (+2.2%). Kering took 3.5% and Hermès 1%. The sector index recorded an increase of 1.1%.

Also supported by Chinese measures, the basic resources compartment gained 1.5% on Friday. Antofagasta and Anglo American ended up 1.4% and 1.8% in London.

The technology sector gained 1.9% on Friday, supported by the general progression of the compartment after the optimistic results and forecasts of the Taiwanese chip giant TSMC.

In Paris, Virbac fell 12.6% after the publication of its quarterly accounts.

A WALL STREET

At closing time in Europe, the Dow Jones, which recorded a new record on Thursday, fell 0.15%, while the Standard & Poor’s 500 and the Nasdaq Composite remained in positive territory and advanced 0.31 % and 0.64% respectively, supported by technology.

TODAY’S INDICATORS

In the United Kingdom, retail sales increased unexpectedly in September on a monthly basis, by 0.3%, according to data from the Office for National Statistics (ONS).

“The September rise…suggests that while households are worried about possible tax increases in the October 30 budget, these fears are not yet being reflected in their spending decisions,” said Alex Curr, an economist. British at Capital Economics.

The British government will present a draft budget on October 30 that includes a tax increase, although authorities have tried to allay concerns by saying it would be “worker-friendly.”

CHANGES

The dollar lost 0.25% against a basket of benchmark currencies after higher-than-expected U.S. retail sales pushed it to an 11-week high on Thursday.

The euro in turn gained 0.26% to 1.0859 dollars.

RATE

Bond yields fell on Friday in the euro zone amid strengthened bets on the ECB’s monetary easing path.

“Recognition of downside risks (of inflation) was the key point,” notes Nick Chatters, fixed income manager at Aegon Asset Management.

The ten-year German Bund yield lost 1.7 basis points to 2.1850% and the two-year, the most sensitive to rate estimates, lost 3.7 basis points to 2.1050%.

In the United States, yields are calming down after the previous day’s increase.

That of ten-year Treasuries fell by 2.7 basis points to 4.0691%. The two-year lost almost 3 basis points to 3.9568%.

OIL

Oil prices are falling on Friday and heading for a weekly fall of around 7%, due to slowing growth in China and easing supply fears in the Middle East.

Brent fell 2.18% to $72.83 per barrel and American light crude (West Texas Intermediate, WTI) lost 2.28% to $69.06.

TO BE CONTINUED ON OCTOBER 21:

(Some data may have a slight lag)

(Written by Diana Mandiá)

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