SINGAPORE: European equities clung to the coattails of surging Asian stocks on Thursday, driven by news of aggressive economic stimulus from China and a fall in oil prices on a report Saudi Arabia is preparing to dump its unofficial crude price target of $100 a barrel. Europe’s Stoxx 600 jumped 1 percent, closing in on August’s all-time high, while Chinese onshore bluechips and Hong Kong’s Hang Seng Index. HSI were both up more than 4 percent. An index of mainland Chinese property stocks rose 15 percent.

Driving the optimism was an official readout from a meeting of China’s politburo that said China would deploy “necessary fiscal spending” to meet this year’s economic growth target of roughly 5 percent, acknowledging new problems and raising market expectations for fresh stimulus on top of measures announced this week. “Chinese stimulus measures increasingly look like a comprehensive package. Earlier this week there were rate cuts and macro prudential measures, now they are talking about adding a fiscal stimulus which every economist was saying was the missing link,” said Yvan Mamalet, senior economist and strategist at Kleinwort Hambros.

Reuters reported separately that China plans to issue special sovereign bonds worth about 2 trillion yuan ($284 billion) this year primarily to stimulate consumption. Also in the mix, Brent and US crude futures were each down more than 2 percent LCOc1, CLc1 after the Financial Times reported Saudi Arabia is preparing to abandon its unofficial price target of $100 a barrel for crude as it prepares to increase output.

European energy stocks, down nearly 3 percent, were the only sector deep in the red. Elsewhere the combined impact of the stories lifted everything from tech stocks in Europe and Asia. S&P futures ESc1 were up 0.75 percent and Nasdaq futures NQcv1 were up 1.34 percent, given an extra boost by an out of hours surge by Micron Technology after it forecast higher than expected revenue due to AI demand for chips, also a factor in Korean gains.

Elsewhere, Europe’s banking drama continued, and Commerzbank’s CEO designate said the lender will hold a first round of talks with UniCredit on Friday as the Italian bank presses for a possible tie-up. Commerzbank shares rose to their highest since 2011 and were last up 5.5 percent. UniCredit rallied 4 percent.

Rates outlook

Central banks were in focus too, and the Swiss National Bank cut rates by 25 basis points on Thursday, choosing not to go for a larger 50-bp move that markets had seen as a possibility. It was the SNB’s third such move this year. There was a knee-jerk strengthening in the Swiss franc against the dollar and euro, but the move did not hold and it was last at 0.9448 to the common European currency.

Elsewhere, policy doves at the European Central Bank are preparing to fight for an interest rate cut next month after a string of weaker-than-expected economic data, a move likely to meet resistance from their more conservative peers, seven sources told Reuters. Markets see roughly a 50 percent chance of a move. “I think the bar is quite high for the ECB to cut in October, the message from (President Christine) Lagarde was that ‘we’d rather wait until December’, and so we’d need to see a very negative surprise on inflation,” said Mamalet.

French inflation data is due on Friday, with more European numbers due next week. Investors were also awaiting a raft of speeches from Federal Reserve policymakers including Chair Jerome Powell that may provide more clues on the US rate outlook ahead of Friday’s release of the core personal consumption expenditures (PCE) price index - the Fed’s preferred measure of inflation.

Markets are now pricing in a roughly 62 percent chance of a 50-bp cut at the Fed’s November policy meeting and see a total of 77 bps worth of cuts by the end of the year. In currencies, the Australian and New Zealand dollars drew additional support from the latest news out of China, with the Aussie gaining 0.5% to $0.6861. — Reuters