European Stocks Rise As Chinese Support Lifts Sentiment

European stocks began the week on a high note, after Wall Street’s gains and an Asian rise after China declared support for its shares market.

At the open, the Stoxx Europe 600 index was up approximately 0.6%. Technology stocks led the increase as traders weighed comments from Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde in Jackson Hole on Friday that didn’t impact the prospects for interest rates. Trading volumes in Europe may be low during the day, since the UK markets are shut for a bank holiday. US market futures rose slightly, as Treasury yields fell and the dollar held stable.

On Friday, US markets surged and Treasury yields increased after Powell stuck to the script in his Jackson Hole speech, stating the Fed is “prepared to raise rates further if appropriate,” while stressing that the central bank would “proceed carefully,” driven by economic data. Similarly, Lagarde stated that the ECB is going to set borrowing costs as high as required to keep inflation under control. 

“Not much was said that changed our outlook for US equities” following Powell’s remarks, according to RBC Capital Markets strategist Lori Calvasina in a note. “Equity investors have already begun to comprehend the idea that interest rates may remain higher for longer, that the Fed’s job may not be finished yet, and that they are data dependent. That message appeared to be reinforced on Friday, but it does not contradict what we’ve been hearing from many equity investors recently.”

Asian benchmarks climbed, while Chinese equities gave up most of their early gains on Monday, demonstrating that Beijing’s attempts to support its markets are failing in the face of economic concerns. The CSI 300 Index of mainland stocks was up roughly 1.4% at 2:46 p.m. in Shanghai, after opening 5.5% higher. Foreign funds increased their selling throughout the day, threatening to make this month’s outflows the largest on record.

Oil and gold were hardly changed elsewhere.