By Caitlin Ostroff
Global stock markets got off to a strong start on the first trading day of the year after China's central bank announced a fresh dose of monetary policy easing.
U.S. futures were higher and stock markets in Asia and Europe were broadly up Thursday. Hong Kong's benchmark Hang Seng Index rose 1.3% and China's Shanghai Composite gained 1.2%. This came after the People's Bank of China on New Year's Day lowered the amount of reserves banks need to keep on hold at the central bank, essentially freeing up cash for lending into the world's second-largest economy.
Futures tied to the S&P 500 were up 0.5%. Stocks in Europe were broadly higher with the Stoxx Europe 600 and the U.K.'s FTSE 100 up 1% and the French CAC 40 rising 1.3%.
The PBOC announcement reinforces expectations that Beijing will follow through on promises to boost its economic growth in 2020.
"Even if there is bad news you see that central banks have put quite a solid foundation under the market," said Bas van Geffen, a quantitative analyst at Rabobank. "Whatever stimulus the PBOC does in China means the economy will do better, which is good for European exporting firms."
Figures published Thursday meanwhile showed activity in China's factories slowed slightly in December but remained in expansionary territory for the fifth straight month.
Markets were further buoyed by renewed hopes of lessening U.S.-China trade tensions. On Tuesday, after European and Asian markets closed ahead of the new year, President Trump said he would sign a phase-one trade deal with China on Jan. 15.
Gains in European stocks were led by the banking and basic resources sectors, both of which stand to benefit from a pickup in Chinese growth. Europe, and especially Germany, is heavily dependent on exports to China.
Germany's largest banks, Commerzbank and Deutsche Bank, were both up strongly. Aerospace giant Airbus rose more than 3% after Reuters reported it beat a yearly production target.
Markit's purchasing managers index figures for December in the eurozone beat analyst expectations, but continued to show contraction in the industrial part of the economy.
Later Thursday, Markit releases December figures on U.S. manufacturing activity and the Labor Department releases weekly initial jobless claims.
Write to Caitlin Ostroff at email@example.com