European stock market correction hurts luxury, oil and steel companies | Financial markets

Strong gains posted weeks ago by companies most exposed to China’s economic growth corrected on Tuesday after no new measures were taken. Basic resources, luxury goods, liquor and the oil sector were the biggest hit on European stock markets in a session that was also not helped by tariff tensions between the EU and China.

While Chinese stock markets returned from the holiday week heavily overvalued, soon to reverse the trend, in Europe luxury firms and spirits makers led the decline in the Euro Stoxx 50 index. Kering was down 4.5%, followed by Pernord Ricard, which fell 4.2%, and LVMH – 3.6%.

Oil’s correction after five consecutive days of growth due to instability in the Middle East also did not help. The price of Brent crude oil, which started the day above $81, closed below $77 on European stock markets. The lack of new measures to stimulate the Chinese economy puts pressure on the price of black gold and raw materials due to a possible decrease in demand from the Asian giant. Thus, the basic resources sector fell by 4.4%, and the oil sector fell by 2.5%.

Among commodity-related companies, correction in copper and iron ore prices weighed on their prices. Among mining companies, Anglo American lost 6.7%, followed by Antofagasta (-5.1%) or Rio Tinto (4.8%). Oil companies such as Neste, Aker, BP and Repsol also recorded declines of 4.7-2.9%.

In the luxury sector, Swiss watch brand Swatch fell 5.4% on the stock market, Kerin and Burberry fell 4.4% and LVMH fell 3.6%. Christian Dior (-2.7%) did not avoid cuts either.

Another of the fined sectors are spirits producers such as Remy Cointreau and Pernod Ricard, whose shares fell 6.4% and 4.2% respectively after China announced temporary anti-dumping measures on imports of brandy from the European Union with October 11.

China is also considering raising taxes on large engine cars imported from the EU. Thus, the car manufacturers that sell a significant number of cars in the country are, among others, Mercedes (-2.2%), BMW (-2%), Volkswagen (-1.4%) and Porsche AG (-1) . China-linked financial firms are also suffering: Prudential (-4.5%), HSBC (-4.2%) and Standard Chartered (-2.2%).

The Development and Reform Commission announced a new fiscal stimulus package of 200 billion yuan (approximately US$28 billion) to target economic growth of 5%. The measures will be structured in two sections. In the first case, 100 billion yuan of ultra-long bonds will be issued to develop unspecified projects, and in the second, the same amount will be allocated for a series of strategic investments, the details of which are also not disclosed.

“The market was expecting more powerful advertising, both in volume and design. China is mobilizing a very small amount of funds (approximately 0.2% of GDP), which it also expects from the 2025 budget. Thus, this does not represent a general increase in resources, but simply an advance of those already expected for the next activity. This statement adds to the monetary stimulus announced at the end of September (reduction of the reserve ratio, reduction of rates…), the scale and effectiveness of which is also controversial (same volume in relative terms, 0.2% of GDP),” Bankinter analysts explain.

These experts’ opinion of China remains “unchanged and continues to be negative. We consider these measures insufficient to stimulate an economy hit by a severe real estate crisis, very low domestic consumption and strong geopolitical tensions that threaten its exports to key regions (USA or Europe).”