European stocks gain as Chinese inflation data stokes optimism

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European stocks opened higher on Monday as investors welcomed data over the weekend that showed deflationary pressures eased in China, stoking hopes that the world’s second-largest economy was stabilising.

Europe’s region-wide Stoxx 600 rose 0.8 per cent at the opening bell, lifted by gains in the basic materials sector, which tends to reflect expectations of demand from China.

In Paris, the Cac 40 advanced 0.9 per cent and Frankfurt’s Dax was up 0.6 per cent. China’s benchmark CSI 300 index added 0.7 per cent after inflation data showed consumer prices rose 0.1 per cent in August, compared with deflation in July.

But Hong Kong’s Hang Seng index slid 0.6 per cent, dragged lower by steep declines in property stocks as new home sales in China’s biggest cities shrank by half in the first week of this month.

The Hang Seng Properties index, a gauge of Hong Kong’s top developers, fell 3.3 per cent, while the mainland properties index was down 1.8 per cent. 

The downturn in China’s property sector, which normally accounts for more than a quarter of the country’s economic activity, prompted authorities to relax requirements for mortgage downpayments this month.

The most recent stimulus measures followed a string of government policies designed to bolster the country’s property sector, stock market and consumer confidence, all of which struggled to recover after three years of severe pandemic restrictions.

Investors in Europe prepared for a busy week of economic data releases and an interest rate decision from the European Central Bank on Thursday.

While the majority of market participants still bet the ECB will keep its policy unchanged in September, firmer energy prices as well as hawkish remarks from policymakers last week lifted the probability of a rate increase to 39 per cent.

Traders are also looking ahead to US consumer inflation data on Wednesday for clues on the outlook for interest rates. Contracts tracking Wall Street’s benchmark S&P 500 rose 0.4 per cent, while those tracking the tech-heavy Nasdaq Composite gained 0.5 per cent ahead of the New York open.

Brent crude rose 0.1 per cent to $90.75 a barrel, near its highest levels this year, after Opec+ producers Russia and Saudi Arabia announced more supply cuts last week. US equivalent West Texas Intermediate fell 0.2 per cent to $87.08 a barrel.

TTF natural gas futures rose 5 per cent in Amsterdam as strikes continued at a liquefied natural gas production site in Australia.