(Bloomberg) — European stocks are set to open higher after Asian peers rallied on a slew of stimulus measures announced by China’s central bank to shore up economic growth and stem a selloff in the equity market.
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Contracts for the Euro Stoxx 50 climbed 0.5% as MSCI’s Asia Pacific gauge headed for a fourth-straight daily gain. Key benchmarks in Hong Kong gained at least 4%, while onshore Chinese indexes rose more than 3% as authorities said they are studying setting up a stock stabilization fund. Most Asian currencies strengthened against the dollar and gold hit a new record.
Risk sentiment got a boost as China said it plans at least 800 billion yuan ($114 billion) of liquidity support for stocks and will allow brokerages to tap the central bank’s funding to buy equities. The measures came as part of a broad package of policy measures to revive the economy, including a cut to a key short-term interest rate and lower borrowing costs on as much as $5.3 trillion in mortgages.
While the initial market response following the stimulus measures was positive, analysts see a risk that the rally may soon fizzle as some of the fundamental issues plaguing China’s economy, including deflationary pressure, remain unsolved.
“These measures clearly show Beijing now understands and appreciates the urgency of boosting stock market and housing market sentiment,” said Siguo Chen, portfolio manager at RBC BlueBay Asset Management. “Short term, it will help the market find a bottom, but long term I think we need to see more fiscal support.”
US stock futures were little changed after the S&P 500 gained 0.3% in the previous session, a whisker away from last week’s all-time high. The yield on policy-sensitive two-year Treasuries was steady at 3.59%. Traders have been wagering on nearly three-quarters of a point of policy easing by year end, suggesting at least one more jumbo rate cut is in store.
Data released Monday showed US business activity expanded at a slightly slower pace in early September, while expectations deteriorated and a gauge of…
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