No bazooka, but China’s latest stimulus is a relief by Reuters

A look at the day ahead in European and global markets from Ankur Banerjee

Investors have long called for China to unleash sweeping stimulus measures to help turn sentiment around, and while Tuesday’s measures are far from a “big bazooka” move, they could still be a step in the right direction.

Chinese stocks rose and bonds rose after China’s central bank announced monetary stimulus, including its intention to cut by 50 basis points the amount of cash banks must hold in the form of reserves – known as required reserve ratios.

Futures indicated that European stocks were headed for a slightly higher open, with a focus on shares of luxury companies, which are quite dependent on Chinese consumers for revenue.

Also included in the stimulus package are measures that will allow funds and brokers to access central bank financing to buy stocks.

While investors and analysts expect these sweeping moves to help lift the stock market in the short term, there remains room for more easing measures as well as fiscal policies to help the stuttering economy.

China’s stock markets have lagged the region, with the top CSI300 index down 4% so far this year after hitting multi-year lows this year amid a tough economic outlook and stubbornly weak investor sentiment they weighed.

On Tuesday, the index rose 2.3 percent, while Hong Kong’s rose 3.2 percent to a four-month high.

Whether these moves are sustained will depend on investors being confident that a recovery in sentiment is underway and that the world’s second-largest economy will meet its growth target for the year.

The Australian dollar was slightly stronger after the Reserve Bank of Australia left rates unchanged as expected. It had hit a new high since 2024 earlier in the session on stimulus measures from China.

With Europe’s economic calendar empty, traders will likely look for cues in the way of US interest rates following last week’s 50 basis point rate cut by the Federal Reserve.

Markets are evenly split on a 50 bps or 25 bps rate cut in November, with US PCE data – the Fed’s favorite inflation gauge – due on Friday and payrolls data due next week the biggest drivers .

Key developments that could influence markets on Tuesday:

Economic events: Germany IFO September business climate

(By Ankur Banerjee in Singapore; Editing by Muralikumar Anantharaman)