China's bold stimulus package fuels global markets, commodities higher

World stocks surged to a high Tuesday (September 24) after China introduced a series of stimulus measures to bolster its economy. The move also boosted commodity prices.

The People’s Bank of China, led by Governor Pan Gongsheng, announced several actions to lower borrowing costs, inject fresh liquidity into the financial system, and ease mortgage repayment burdens for households.

The central bank also introduced structural monetary policy tools aimed at stabilising capital markets for the first time.

Impact on global stock markets

China’s stock markets responded swiftly, with the CSI300 and Shanghai Composite indexes both jumping over 4 per cent. Hong Kong’s Hang Seng Index climbed 4.1 per cent, reaching a four-month high.

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Ecaterina Bigos, chief investment officer for Asia ex-Japan at AXA Investment Managers, said that the immediate market reaction has been positive as these measures seem more decisive compared to previous interventions.

Chinese stocks had been underperforming in the region, with the CSI300 down 2.3 per cent this year due to tepid previous stimulus efforts.

In Europe, the pan-European STOXX 600 index rose 0.6 per cent, driven by gains in China-linked sectors such as mining and luxury goods. Germany’s DAX traded just below its all-time high. The global MSCI World Index also added 0.3 per cent, touching a record high.

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Commodity prices

Commodity prices rallied on the news, with oil climbing over 2 per cent. Copper reached a 10-week high, buoyed by optimism that demand from China, the world’s largest consumer, would increase. Iron ore futures on China’s Dalian Commodity Exchange posted their biggest intraday gain in over a year.

Gold also hit a record high of $2,639.95 per ounce as geopolitical tensions in the Middle East prompted safe-haven buying.

Meanwhile, the Reserve Bank of Australia held interest rates steady, stressing the need for tight policy. This was in contrast to the US Federal Reserve, which recently cut rates by 50 basis points as it began its easing cycle.

With inputs from agencies