Stock Market In Celebration: China Injects Billions, The Cac 40 And The Dow Jones Soar

The Chinese economic situation was under high pressure: Western sanctions, a real estate crisis, and industrial stagnation. Faced with these challenges, Xi Jinping turned on the money printing machine and drastic measures were taken. The result? A fresh breeze on global stock markets, where the Cac 40 and the Dow Jones soar. Behind these shocks, recent stimulus plans in China are at the heart of the current financial upheavals.

The impact of Chinese measures on the global stock market

The stock market did not take long to react to the Chinese stimulus announcements, which include printing up to $1.42 trillion and reducing its central bank’s rates by 0.20 basis points.

And the impacts did not take long to emerge. The Cac 40, the flagship index of the Paris Stock Exchange, jumped by over 1%, reaching 7,600.59 points, while Wall Street was not left behind, with a Dow Jones breaking records.

The luxury sector, particularly exposed to the Chinese economy, was one of the big winners of the day. Hermès (+3.85%), Kering (+3.18%), and LVMH (+3.19%) saw their stocks soar, just like ArcelorMittal (+4.76%), the steel giant.

The massive stimulus plans include a reduction in mortgage rates and a reduction in the required reserves of Chinese banks, thus providing a bath of liquidity to the market.

This breath of fresh air for the Chinese economy also allowed the CSI 300 index to achieve its best day since 2020, recording an increase of 4.3%.

Among the decisive elements of this stimulus:

• Reduction of 50 basis points in the required reserves of banks;
• Reduction of mortgage rates by 50 points;
• A 500 billion yuan program for share buybacks.

China is pulling out all the stops, but is it enough?

The economic measures unveiled by Beijing caused a sensation on global markets. However, some economists, such as those at Goldman Sachs, remain skeptical about their long-term effectiveness.

The real estate crisis continues to weigh heavily, and Chinese consumers seem reluctant to borrow. Might as well stock up on bitcoin (BTC) in the local crypto black market? Despite a growth target of 5%, achieving this goal seems compromised.

The Chinese authorities are therefore relying on a series of measures to support the local stock market and encourage companies to invest. Among them, a reduction in the down payment ratio needed to buy a secondary residence, aiming to revitalize the real estate sector.

But beyond the numbers, this stimulus could well have consequences on the global economy, affecting investments across various sectors. Even Bitcoin could benefit.