Record level

The STOXX Europe 600 Index, which offers a broader view of the European market and includes 600 large, medium and small companies from various sectors in 17 European countries (including the UK), closed at a new high of 528.54 points on Friday 27 September 2024. This surpassed the highest level seen in early September when it was just under 525 points. Compared to the same period last year, the index has strengthened by more than 17 %.*

Price development of the STOXX Europe 600 index over the last 5 years (source: Investing.com)*

The STOXX 50, which focuses on the 50 largest blue-chip companies of varying market capitalisation sizes from 8 eurozone countries, closed at 5,067 points, its highest level since the beginning of June, when it stood at 5,069 points. It has risen by more than 21 % year-on-year. However, at the start of the following week, both indices experienced a correction in value, mainly due to a fall in carmaker shares and also in anticipation of economic data. On 30 September, the STOXX 600 index stood at 522 points and the STOXX 50 at 5 014 points*.

Price development of the Euro STOXX 50 index over the last 5 years (source: Investing.com)*

Chinese stimulus is still on course

The announcement of the largest package of measures by the Bank of China (PBOC) was key for European equities as many companies are dependent on demand from China. According to available data, as much as 8 % of European companies' revenues come from China, compared to just 2 % for US companies. A series of economic stimuli measures aimed at reviving growth, including Friday's interest rate cut and increased liquidity in the banking sector, are aimed at achieving economic growth of around 5 %. The news kept investors in a positive mood, with sectors such as automotive, mining and luxury goods growing. The automotive and chemical sectors strengthened by around 2 %. The package boosted metal prices and thus the European mining sector, with Rio Tinto adding 12 % and Anglo American almost 9 %, for example. Luxury brands were the best performers, rising more than 10 % during the week. Burberry ended the week with a gain of 13 %, Richemont and LVMH with 14 % and Hermes with 12 %.

Investments that boosted luxury brand shares

Gains in the luxury goods sector were boosted by news of French group LVMH's investment in Double R, a company controlled by Remo Ruffini's holding company. The latter is also the CEO of the well-known Italian brand Moncler, in which he owns a direct stake of 15 %. Details of the size of the deal are not available, but LVMH has acquired a 10% stake in Double R and an indirect stake of 1.6 % in Moncler, with an option to increase this to 4% over the next year and a half. Shares in Moncler rose by as much as 15 % between Thursday 26 September and Friday morning following the news.* The move has positive implications for both companies, while the French conglomerate has strengthened its position, it could mean new opportunities for the Italian brand.

The evolution of Moncler's share value over the last 5 years (source: Google Finance)*.

Softer inflation, high unemployment

Last but not least, European indices were boosted by preliminary inflation data from the key economies of France and Spain, which helped ease concerns over rising costs. Inflation rates in these countries fell more than expected in September. In addition, the German labour market showed signs of further cooling in September, with the unemployment rate remaining at the level of three years ago. The softer inflation outlook, together with the German data, raised expectations of an ECB interest rate cut in the coming months. [1]

Olívia Lacenová, a senior analyst at Wonderinterest Trading Ltd.

* Past performance is no guarantee of future results

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future results. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.