Sep 06, 2023

Global stocks fell this week on poor Chinese data, but could rally soon.

CH 50 Weekly Chart

CH 50: Weekly Chart

The CH50 index breached support last week but found buyers, with the 13,000 level now acting as a resistance level for further gains.

Data released on Tuesday showed that China’s services sector contracted in August, reaching its lowest level in eight months. This adds to concerns about the recovery of the world’s second-largest economy. Meanwhile, analysts at Goldman Sachs have reduced their odds of a US recession, citing cooling inflation and a still-resilient labour market.

In a report published on Monday, Goldman Sachs reduced its prediction of a recession in the next 12 months to just 15%. This is in line with the historical average chance of a recession in any year. It is also down from the Wall Street bank’s prior forecast of 20% and its 35% projection in March as the banking crisis erupted.

Global funds have sold off Chinese stocks in record numbers, dragging bullish positioning to the lowest level since October. Money managers are unimpressed by the stimulus measures that have already been announced, and the gloom surrounding China continues to weigh on the market.

Negative sentiment could signal a bottom in Chinese stocks, with a rally through 13,000 potentially sparking a revival.

AI, cash, and iPhone 14 are reasons to be optimistic about global stocks.

Investors returned from the US Labor Day holiday to find that the S&P 500 index had fallen by 0.40%. All eyes will now be on the Institute for Supply Management’s (ISM) services sector index on Wednesday, which could confirm or reduce expectations of a recession in the world’s largest economy.

The Chinese stock market is expected to rebound above 13,000, after which it is likely to target the 13,550 and 14,400 levels.

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