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The US media said that European stock markets have been following the pace of Wall Street for decades, but now China's influence on the direction of European stock markets is becoming larger and larger.

According to the US "Wall Street Journal" website reported on February 17, the European economy is accelerating growth, but its rising stock market may also illustrate the development momentum of the Chinese economy. European companies with the closest relationship with the Chinese economy performed significantly better than their peers, helping the MSCI Europe Index, which is based on a basket of stocks in 15 European countries, rose more than 20% from its February 2016 low.

According to Deutsche Bank's analysis, European stocks that have the closest relationship with China's economy (such as mining companies, machinery and equipment, and other capital goods producers) have performed 30% better than the entire stock market in the past year. The industries most incompatible with the Chinese economy, including the telecommunications, retail and pharmaceutical industries, performed the worst.

European stock markets have been following the pace of Wall Street for decades, but now China's influence on the direction of European stock markets is growing. Wolff von Rothberg, strategist at Deutsche Bank, said: "This is the China Trade Year."

It is true that the rise in European stock markets has also benefited from the improvement of the European and American economies. Last year, the Eurozone economy was on par with the US economy for the first time since 2008, while unemployment in the region fell to a seven-year low.

According to estimates by the European Commission, the European economy may grow by 1.6% this year. Most fund managers surveyed by Bank of America expect that economic growth and inflation will accelerate in Europe next year.

This has created a renewed demand for European stocks, although they are also worried that the upcoming elections in France and the Netherlands may bring some instability.

However, the rise of European stock markets is mostly inseparable from China's support.

According to the US financial data software company, European listed companies directly receive only 5% to 6% of their income from mainland China. But from the huge impact on the global economic cycle, commodity prices and the demand for risky assets, China's influence on European companies is much greater.

The melting of China's stock market in early 2016 and investor concerns about the depreciation of the renminbi led to a sharp fall in European stock markets, also indicating the relationship between the two. Worried that China’s second-largest economy in the world is on the brink of economic downturn, the Stoxx Europe 600 stock index fell by about 17% in the first six weeks of 2016 – more than twice the decline in the stock index after the Brexit vote. .

But the Chinese economy seems to have stabilized, achieving a 6.7% growth in 2016. China's Producer Price Index (PPI) reached its five-year high in January 2017 after years of weakness. At the same time, China's manufacturing industry has grown for six consecutive months. According to analysts, this provides support for the demand for European machinery and equipment, and those European stocks that are more sensitive to the Chinese economy are rising.

Paul Markham, director of the British Newton Investment Management Company, said that thanks to China's economic stimulus plan, the German industry and other departments have achieved particularly outstanding results in the past year. He said: "Europe is more like an economic follower." Europe needs economic growth in regions such as China and the United States to boost its economy and stock market.

The European mining industry is the best performing industry in the region in the past year. Expectations of Chinese demand have led to a sharp rise in metal prices, which has also boosted the industry. Copper futures rose about 30% from a year ago, and iron ore futures also climbed to highs for years.

According to Standard & Poor's, China accounts for more than half of global demand for most metals. Compared with the low point of a year ago, the UK's FTSE 350 Mining Index increased by 145%. In contrast, the broader FTSE 100 index rose by 32%.

Companies that have direct income with China also performed well. For example, the luxury goods manufacturer Louis Vuitton Group recently pointed out that China is one of the reasons for its 14% increase in net profit in the second half of 2016. The company's share price has increased by 31% compared with last year.

Carolyn Vincent, head of investment at Cavendish Asset Management in the United Kingdom, said: "Although silent, it is clear that China has more influence on the (European stock market) than the United States."

Source: Reference message