Federal Reserve’s preferred measure, PCE inflation, falls to 2.2%, easing way for further rate cuts

Chinese stocks had their best week in many years, boosted by various stimulus measures announced this week by the Beijing government and People’s Bank of China.

The Shanghai Composite Index climbed by 2.9%, logging its biggest weekly gain since 2008, up nearly 10% while China’s CSI 300 jumped by 4.5% and had its best week since November 2008, ending 15.7% higher.

A veritable feast of economic stimulus measures has led investors to take a more optimistic view of the earnings potential for Chinese companies and foreign ones selling into the country. Lower borrowing costs, smaller deposits for buying homes and more capacity for banks to lend money – these lay the foundations for greater economic activity among businesses and consumers.

On paper, it looks interesting. But whether the desired results end up meeting investors’ expectations is another thing. China is notorious for throwing stimulus measures left, right and centre, and the success rate is patchy to say the least.

Weaker growth prospects and easing inflation concerns show a clear turning in eurozone sentiment at the moment, which adds dovish pressure on the ECB.

Inflation prints for Spain and France have come in very soft this morning, likely resulting in a first sub-2% eurozone inflation print for September. While this is related to base effects and inflation is expected to tick up again towards the end of the year, the question is by how much this can happen. Petrol prices have dropped significantly in recent weeks on the lower oil price, which limits the prospects of a headline inflation rebound. For the European Central Bank, a lot of focus will be on whether core inflation will come down though, with services inflation as its main concern.