(Bloomberg) -- European equities tested new record highs Friday, boosted by China’s slew of stimulus measures and growing conviction that US and euro-area interest rates will fall further in the coming months.
The Stoxx Europe 600 Index was up 0.4% by 12:30 p.m. in Paris, having ended Thursday’s session with its highest close on record on back of a rally in China-exposed stocks and signs the US economy is headed for a soft landing. Luxury companies such as Richemont SA, Hermes International SCA and Kering SA extended gains on expectation that Chinese growth-boosting measures will benefit European exporters, while autos were the top performing sector, rising about 2.4%.
Europe’s biggest luxury name LVMH got added impetus from an announcement it would invest in designer outdoor label Moncler SpA, in a deal that will give it a seat on the Italian company’s board. Moncler jumped as much as 15%.
“This is one of the turning points of the year,” said David Kruk, head of trading at La Financiere de L’Echiquier in Paris. “I have the feeling now that everyone is going to go with the flow,” he said, referring to buying cyclical stocks and stocks exposed to the Chinese economy.
By contrast, healthcare stocks, typically seen as safety plays, were the day’s worst performers. Novo Nordisk A/S shares dropped as much as 4.6% after JPMorgan flagged that the Danish drugmaker’s third-quarter report may disappoint, due to slower-than-expected sales of its blockbuster weight-loss drug Wegovy.
While Europe’s growth slowdown has weighed on the market, stocks are getting a lift from the prospect of lower interest rates. Traders added to bets that the European Central Bank will cut rates again in October, after data showed inflation in France and Spain easing below 2%.
The Federal Reserve is also expected to cut rates in November, although revised data showed Thursday the US economy is in better shape than expected. The Fed’s preferred inflation indicator and a snapshot of consumer demand will be released later on Friday.
For more on equity markets:
- The Risk-Reward on Retail Looks ‘Questionable’: Taking Stock
- M&A Watch Europe: Moncler, Eni, Lundin, Doro, Swatch, Renault
- Europastry Marks Latest Mid-Cap European IPO Comeback: ECM Watch
- US Stock Futures Unchanged; Establishment Labs, TransMedics Gain
- Glass Half Full: The London Rush
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