European stocks drift higher as China seeks to ease regulatory jitters


Equities updates

European stocks rose on Thursday as Beijing sought to ease international fears of a regulatory crackdown and the US central bank indicated it would keep pandemic-era monetary policy unchanged.

The regionwide Stoxx 600 was up 0.4 per cent. National bourses were also up, with Germany’s Dax 30 gaining 0.2 per cent and France’s CAC 40 rising 0.8 per cent, close to this year’s high. London’s FTSE 100 rose 0.5 per cent, with miners Anglo American, Polymetal International and Rio Tinto all rising at least 1 per cent.

“There’s a few factors in Europe — the economic recovery is absolutely one of them,” said Jeremy Gatto, a multi-asset investment manager at Unigestion, emphasising the successful vaccine rollout across the continent.

“Europe tends to have more correlation towards China,” he added, “so the pick-up in Chinese stocks in the last two days have been supportive as well”. Chinese stocks suffered a harsh drop at the start of the week after what was in effect a ban on the private tutoring industry.

Beijing held a call with global investors, Wall Street banks and Chinese financial groups on Wednesday night in an attempt to soothe nerves as fears spread of more far-reaching clampdown. Hong Kong’s Hang Seng was up 3.3 per cent on Thursday, although it was still down 9 per cent in the month to date. The CSI 300 index of stocks traded in mainland China advanced 1.9 per cent.

Line chart of Stoxx Europe 600 index showing European stocks have drifted around a record high for weeks

News from the US has also helped buoy European stocks, with the Federal Reserve’s policy committee on Wednesday indicating it was not yet seeing sufficient grounds for imminent policy action despite “progress” towards its goals of full employment and 2 per cent average inflation. Fed chair Jay Powell said there was more “ground to cover” ahead of any tapering of its vast bond-buying programme.

“That’s reassured markets that there’s some way to go,” said Gatto. “The market consensus is for the Fed to start mentioning tapering towards the end of the year and to give further clarity.” Indices tracking US stock-index futures were trading almost flat.

Oil prices were up slightly on Thursday morning, though somewhat down from the highs of the month. Brent crude, the global benchmark, was up 1 per cent at $75.49 a barrel having reached $77.84 earlier in the month. The US benchmark, West Texas Intermediate, climbed 1.1 per cent to $73.20 a barrel, compared with a high of $76.07 at the beginning of July.


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