Last week the market was focused on China, as the country’s officials announced a raft of measures aimed at boosting consumption, property demand, and stock market liquidity. The People’s Bank of China lowered its reserve requirement ratio, the repurchase rate, the medium-term lending facility rate, and hinted at a potential cut to the loan prime rate. A flood of fiscal spending was also announced with upcoming bond issuance expected to reach roughly half of the amount spent to counter the Great Financial Crisis.
Chinese equities soared in response to the news with the Shanghai Composite and Hong Kong’s Hang Seng jumping 13.0% for the week markets in Europe and the U.S. also showed strength. The hope that China’s stimulus measures will succeed in providing a needed boost to the Chinese economy spilled over to the commodities market, which was also eyeing the formation of Hurricane Helene in the Gulf of Mexico. Recent increases in the price of crude oil did cause some concerns at the back of investors’ minds.
There was also renewed strength in semiconductor names after Micron (MU) beat quarterly expectations and issued strong guidance. The stock rallied to a two-month high, taking the PHLX Semiconductor Index for the ride (+4.3% for the week). The semiconductor sector did cool off a bit on Friday following a Bloomberg report saying that the Chinese Government is pressuring domestic companies to shift from Nvidia to domestically made AI chips. The overall tech sector gained 1.1%.