China Announces Robust Stimulus Measures

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

6.    Major indexes weekly chart and technical support & resistance levels

U.S.

For the week of Sep 27, the Dow Jones Industrial Average(DJI) and the S&P 500 Index(SPX) moved to record highs, as investors appeared to celebrate new stimulus measures in China (see below). Chemicals and materials stocks were particularly strong on hopes for a rebound in Chinese demand. Copper prices also increased, raising hopes that “Doctor Copper” was again reflecting a healthier global industrial economy. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1.    Election heading to Nov 5. This election poses uncertainty, and markets hate uncertainty. Historically, market volatility has risen leading up to elections and has subsided after. Markets have generally done well after elections, so stick around. 

2.    Inflation gauge nears Fed’s target. On Friday, the Federal Reserve’s preferred inflation gauge, the core (less food and energy) personal consumer expenditures (PCE) price index, rose only 0.1% in August, a tick below expectations. On a year-over-year basis, the index climbed only 2.2%, close to the Fed’s 2.0% long-term inflation target and the least since February 2021.

SPX sectors in play

Six out of the 11 SPX sectors closed with gains for the week. Chemicals and materials (XLB) stocks were particularly strong on hopes for a rebound in Chinese demand. “Doctor Copper” especially strong. Technology stocks related sectors including Consumer Discretionary(XLY) and Communication Services(XLC) outperformed as well, helped by reports of a possible takeover of Intel and news that NVIDIA’s CEO had ceased sales of his own shares in the company. In addition, chipmaker Micron Technology surged and seemed to provide a general tailwind for the sector following its upbeat outlook for artificial intelligence demand. Energy stocks (XLE) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Both Dow(DJI) and SPX indexes hit new records again, while Nasdaq Composite(COMP) also closed its 3^rd weekly gains in a row. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

 

China/HK

China stocks surged after Beijing unveiled a slew of measures to shore up the economy. The Shanghai Composite Index(SSE) gained 12.81% and the blue chip CSI 300 added 15.7%. In Hong Kong, the benchmark Hang Seng Index gained 13%. (Refer to the above weekly performance table). The rally marked the biggest weekly gain for the benchmark CSI 300 since 2008, when Beijing unveiled a massive stimulus package during the global financial crisis.

Key highlights for the week and outlook for China/HK:

1.    The People’s Bank of China (PBOC) cut its reserve requirement ratio by 50 basis points for most banks, its second cut in banks’ required reserves this year, and reduced its seven-day reverse repo rate—a key short-term policy rate—by 20 basis points to 1.5%. It cut the medium-term lending facility rate by 30 basis points to 2%, marking the largest-ever cut to the monetary policy tool since the central bank began using it to guide market rates in 2016, according to Bloomberg. The moves were part of a sweeping stimulus package announced last Tuesday at a rare press conference by PBOC Governor Pan Gongsheng that aims to jumpstart China’s ailing economy. Other measures unveiled by the PBOC included a rate cut for existing home mortgages and slashing the nationwide down payment ratio for second home purchases to 15% from 25%. 

2.    On Thursday, China’s top leaders vowed to take action to stabilize the country’s property market and make real estate prices “stop declining,” according to state media. The readout from the 24-man Politburo included a statement that China would deploy the necessary fiscal spending to meet its 2024 growth target of around 5%. The Politburo statement contained no specifics on fiscal spending. However, China plans to issue special sovereign bonds worth about RMB 2 trillion (USD 284.4 billion) this year as part of the fiscal stimulus plan, Reuters reported, citing unnamed sources. The package will include RMB 1 trillion of special sovereign debt focused on boosting domestic consumption, which has flagged since pandemic lockdowns ended. 

3.    Taken together, analysts believe the stimulus package is a positive development for China’s economy and will bolster near-term activity and pull market sentiment from very weak levels.

Click below SSE and .HSI indexes for their weekly charts. 

SSE weekly chart

.HSI weekly chart

Singapore

STI index closed lower after a six-week consecutive rally with total of 11% gains, the decline possible due to proit-taking led by the banks. Counters related to China rallied following China/HK markets’ stunning gains. Refer to below index stocks weekly performance.

Click below for STI weekly chart.

STI weekly chart

Source: Some contents and data excerpted from various public market reports.

Fed Cuts Rates for First Time in Over Four Years, Stocks Hit New High

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

6.    Major indexes weekly chart and technical support & resistance levels

U.S.

For the week of Sep 20, major U.S. indexes moved to record highs as investors celebrated the kickoff to what many expect to be a prolonged Fed rate-cutting cycle. The rally was also relatively broad, with the smaller-cap indexes outperforming, the small-cap Russell 2000 Index, in particular, ended the week roughly 9% below the all-time high it established in November 2021. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1.    First rate cut to start easing cycle. After the most aggressive tightening campaign in 40 years and the second-longest pause in history with rates in restrictive territory, the Fed cut its policy rate last week for the first time in four years. Instead of the typical quarter-point move (0.25%), the Fed opted to lower rates by a larger half a percentage point (0.5%), taking the policy target range down to 4.75%-5.0% from 5.25%-5.5%. 

2.    Yield curve normalises. The 10-year yield's premium to the 2-year yield is now around 15 basis points. The yield curve is important because an inverted yield curve is an indication of a recession. This time round, the economy has not - to-date - gone into a recession. The normalisation of the yield curve is indicative of normal economic conditions. As to whether a recession has been averted completely or contained, that remains to be seen.   

SPX sectors in play

Eight out of the 11 SPX sectors closed with gains for the week. The rally was also relatively broad, Energy(XLE), Financials(XLF), Communication Services(XLC) and Consumer Discretionary(XLY) were among the top gainers, while the smaller Real Estate(XLRE) and Consumer Stapler(XLP) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Both Dow(DJI) and SPX indexes closed new records, while Nasdaq Composite(COMP) is about 4% away to its peak. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

 

China/HK

China stocks rose in a holiday-shortened week as the Fed’s decision to cut interest rates offset a batch of disappointing economic data. The Shanghai Composite Index(SSE) gained 1.21% and the blue chip CSI 300 added 1.32%. In Hong Kong, the benchmark Hang Seng Index gained 5.12%. (Refer to the above weekly performance table). Markets in mainland China were closed Monday and Tuesday for the Mid-Autumn Festival. Hong Kong markets were closed Wednesday but reopened Thursday.

Key highlights for the week and outlook for China/HK:

1.    August data underscored the slowing momentum in China’s economy. Industrial production rose 4.5% from a year earlier, lagging forecasts and down from July’s 5.1% increase amid weaker commodity prices and auto sales. Retail sales expanded a below-consensus 2.1% from a year ago, easing from July’s 2.7% rise. Fixed asset investment rose a lower-than-expected 3.4% in the January to August period, down from the 3.6% expansion recorded in the first seven months this year, while property investment fell 10.2% year on year. 

2.    China’s urban unemployment rate unexpectedly edged up to 5.3%, a six-month high, from 5.2% in July. The property sector, now in its fourth year of a downturn, showed no sign of a letup. New home prices in 70 cities fell 0.7% in August, according to the National Bureau of Statistics, unchanged from the pace of declines in the prior three months and marking the 14th consecutive monthly drop. 

3.    Taken together, the indicators suggested growing risks for Beijing in meeting its economic growth target of about 5% this year. As a result, many economists expect that China’s government will implement further easing measures to stimulate the economy. The start of the long-awaited U.S. interest rate cuts is also expected to give policymakers more room to cut rates in the coming months.

Click below SSE and .HSI indexes for their weekly charts. 

SSE weekly chart

.HSI weekly chart

Singapore

STI index closed to new record on its marvellous 6^th consecutive weekly gain. Blue chip industrials and banks led the rally. Refer to below index stocks weekly performance.

Click below for STI weekly chart.

STI weekly chart

Source: Some contents and data excerpted from various public market reports.

U.S Stocks Rebound After Sell-off, Yields Hit New 52-week Lows

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

6.    Major indexes weekly chart and technical support & resistance levels

U.S.

For the week of Sep 13, major U.S. indexes post solid gains and largely recovered from the previous week’s steep losses, which saw the S&P 500 Index(SPX) suffer its worst weekly decline since March 2023. Growth stocks outpaced value shares by a wide margin, helped by strong performance from technology stocks. NVIDIA was a particularly strong contributor after the chip giant offered a positive outlook on artificial intelligence at an investment conference. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1.   Inflation. Core inflation slightly higher than expected. On Wednesday, stocks initially headed sharply lower following news that core (less food and energy) consumer inflation rose to 0.3% in August, a tick higher than consensus expectations. Meanwhile, headline inflation showed an annual increase of 2.5%, well below July’s increase of 2.9% and its lowest level since early 2021. In any case, it appeared the news from NVIDIA seemed to help drive a turnaround later Wednesday morning. 

2.    Interest rate. Treasury yields ticked lower during the week with the yield on the benchmark 10-year Treasury note trading at year-to-date lows. 

3.    Fed rate cut. The futures market is evenly divided on whether the Federal Open Market Committee (FOMC) will cut rates by 25 basis points (0.25%) or a more-aggressive 50 basis points (0.5%) when it concludes its policy meeting next Wednesday. 

SPX sectors in play

All but one of the 11 SPX sectors closed with gains for the week. Growth stocks including Tech(XLK) and Consumer Discretionary(XLY) sectors outpaced value shares including Consumer Staplers (XLP) and Financials(XLF) by a wide margin, helped by strong performance from technology stocks. NVIDIA was a particularly strong contributor after the chip giant offered a positive outlook on artificial intelligence at an investment conference. Energy(XLE) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Dow(DJI) and SPX bounced back to near its peak while Nasdaq Composite(COMP) is about 5% away to its peak. All three indexes are currently trading above their 20/50 and 200dma, which is a bullish trend. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

 

China/HK

China stocks declined as weak inflation data spurred concerns about a downward price-wage spiral weighing on the economy. Both the Shanghai Composite Index(SSE) and the blue chip CSI 300 fell 2.23%. In Hong Kong, the benchmark Hang Seng Index gave up 0.43%. (Refer to the above weekly performance table).

Key highlights for the week and outlook for China/HK:

1.    China’s consumer price index rose 0.6% in August from a year earlier, up from 0.5% in July, but below economists’ forecasts. Core inflation, which strips out volatile food and energy costs, increased 0.3%, slowing from July’s 0.4% rise, and marked the lowest level in over three years. The producer price index fell 1.8% from a year ago, lagging forecasts and deepening from July’s 0.8% drop, extending the deflation in factory gate prices that began in late 2022. The latest data spurred calls for Beijing to roll out more forceful measures to stave off a negative cycle of falling corporate revenue, wages, and spending that many analysts believe threatens China’s longer-term growth. 

2.    Exports exceeded forecasts in August, rising 8.7% from a year earlier, up from 7% growth in July. Imports expanded a lower-than-expected 0.5% in August, easing from July’s 7.2% gain. The overall trade surplus increased to USD 91.02 billion from USD 84.65 billion in July. China’s exports have been a bright spot for its economy, which is mired in a prolonged property crisis. However, analysts cautioned that overseas demand could face volatility due to the slowing U.S. economy and rising trade tensions.

Click below SSE and .HSI indexes for their weekly charts. 

SSE weekly chart

.HSI weekly chart

Singapore

STI index recorded a remarkable 5^th consecutive weekly gain, added 3.13% to its multi-year high since May 2018.  Blue chip industrials and banks led the rally. Refer to below index stocks weekly performance.

Click below for STI weekly chart.

STI weekly chart

Source: Some contents and data excerpted from various public market reports.

U.S Economic Slowdown Worries Weigh on Stocks

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.    S&P 500 sector index weekly performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

6.    Major indexes weekly chart and technical support & resistance levels

U.S.

For the week of Sep 6, major U.S. indexes suffered its worst weekly drop in 18 months, as worries over an economic slowdown appeared to weigh on sentiment. Markets have taken on a clear risk-off tone since the start of September, in part driven by the rising uncertainty in the labor market and economic data, and in part perhaps driven by a natural pause or period of profit-taking after a strong rally.

Overall, markets have rallied sharply for the first eight months of the year, with the S&P 500(SPX) and technology-heavy Nasdaq(COMP) up about 18% through August. We are now headed toward a seasonally weaker period of September and October, followed by U.S. elections on Nov. 5. Given the uncertainty in the economic data (as well as political uncertainty), combined with the strong rally earlier this year, we could expect some form of a market pause or correction in the weeks ahead. Refer to below major indexes weekly performance table.

Key highlights for the week and next:

1.    Recent labor market data has been weakening- although it’s still not recessionary. Friday’s official payrolls report showed there were 142k  jobs added in August, below consensus estimates of around 160k, while July’s gain was revised down to 89k, marking the lowest level since December 2020. The household survey revealed that the unemployment rate had ticked lower, however, from 4.3% to 4.2%. Average hourly earnings also rose 0.4%, better than expected. 

2.    The Fed will begin its rate-cutting cycle in September, and may prep the markets for larger cuts to come. It’s expected the Fed will likely cut rates by 0.25% at the September 18 FOMC meeting, bringing the fed funds rate to 5.0% – 5.25%. If market conditions deteriorate substantially between now and the Fed meeting, a 0.50% rate cut may become more likely. 

3.    Treasury yields move lower, while yield curve un-inverts: More recently, Treasury yields across the board move lower, in response to weaker labor market data as well as the potential for Fed rate cuts. Notably, the yield curve (10-year Treasury yield minus 2-year Treasury yield) has turned positive in recent days after remaining in negative territory since mid-2022. This un-inversion of the yield curve, however, tends to occur as the Fed is poised to cut rates and when the economy is softening. 

4.    Crude oil prices hit new lows of the year: The S&P Global Commodity index has also hit new lows of the year, driven in part by WTI crude oil prices, which are now around $68 per barrel. The sell-off in oil and commodities also reflects the fears of a demand slowdown globally, particularly in the Chinese market, which has been plagued with weakening consumer and economic growth. 

SPX sectors in play

Eight out of 11 SPX sectors closed with gains for the week. Stock markets rotate defensively: Thus far for September, we have already seen about a 4% pullback in the SPX. Technology(XLK) shares led the declines, driven in part by a drop in NVIDIA following rumors that it may be the subject of a Justice Department antitrust investigation, which led to a roughly USD 300 billion drop in the chip giant’s market capitalization. Energy(XLE) shares were also especially weak on the back of a decline in oil prices. Conversely, the typically defensive utilities(XLU), consumer staples(XLP), and real estate sectors(XLRE) held up better. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

Dow(DJI) and SPX closed 1^st weekly down while Nasdaq(COMP) index recorded 2^nd weekly loss. The tech-dominated COMP index formed a lower high on its chart clearly which indicates a much weaker performance. Both DJI and SPX indexes still above their 50 weekly MA while Nasdaq(COMP) closed below it decisively. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks retreated as investors digested weak corporate earnings and economic data. The Shanghai Composite Index(SSE) declined 2.69% and the blue chip CSI 300 lost 2.71%. In Hong Kong, the benchmark Hang Seng Index gave up 3.03%. (Refer to the above weekly performance table).

Key highlights for the week and outlook for China/HK:

1.    China’s official manufacturing purchasing managers’ index (PMI) slipped to a lower-than-expected 49.1 in August from 49.4 in July as production and new order declines deepened, the National Bureau of Statistics reported. The gauge has hovered below the 50-mark threshold, separating growth from contraction for all but three months since April 2023, according to Bloomberg. The nonmanufacturing PMI, which measures construction and services activity, edged up to an above-consensus 50.3 in August from July’s 50.2. 

2.    Separately, the private Caixin/S&P Global survey of manufacturing activity, which polls smaller, export-oriented firms, expanded to a better-than-expected 50.4 from July’s 49.8 as new orders returned to growth. The Caixin services PMI fell to 51.6 from July’s 52.1 reading, missing economists’ forecasts, as softer new work inflows and higher input costs contributed to lower staffing levels. The mixed PMI readings highlighted the uneven performance of China’s economy as a housing market slump—now in its fourth year—and rising trade tensions have weighed on the growth outlook. 

3.    New home sales extend declines. The value of new home sales by the country’s top 100 developers fell 26.8% in August year on year, accelerating from a 19.7% drop in July, according to the China Real Estate Information Corp. 

Click below SSE and .HSI indexes for their weekly charts. 

SSE weekly chart

.HSI weekly chart

Singapore

STI index recorded 4^th consecutive weekly gains, with 0.34% up. S-Reits led market gainers as investors expect U.S interest-rate cut is finally just around the corner. Refer to below index stocks weekly performance.

Click below for STI weekly chart.

STI weekly chart

Source: Some contents and data excerpted from various public market reports.