Global Futures for indices are up this morning after another previous decline. The strongest price movement is amongst Chinese stocks, specifically the Hang Seng Index. So what has driven the change this morning?
The latest PMI figures from China, the world's second-largest economy, influence the latest upward price movement. The data has stunned investors as the indexes read the fastest acceleration in over a decade. The Manufacturing Purchasing Managers’ Index increased from 50.1 to 52.6. This is also significantly higher than 50.6, which was previously expected. The Services PMI figure read 56.3, again higher than the expected reading of 54.9.
Since the latest PMI release from China, all indices have turned green, but the Hang Seng Index spiked almost 4.5% during the Asian Trading Session. Some investors may question why other indices have also increased in response to the news. This is something we will cover below.
DAX
The DAX is also one of the indices that positively reacts to the latest Chinese data. The DAX increased by 0.50% before the European Trading Session, but the index has also seen the smallest increase compared to other UK and EU indices. Currently, the French CAC40 is the best-performing European index.
Let’s start by answering why Chinese data is affecting global equities. China is the second-largest economy in the world and the largest exporter by far. Global companies are mainly using products and raw materials derived from China. Therefore economic growth in China indicates a fluent flow of supply, which is positive for global markets and can even support central banks in bringing inflation down.
The price this morning has continued to form a symmetrical triangle which indicates the price is losing direction and is close to seeing a strong breakout. The DAX’s price has mainly kept within the range of 15,555 and 15,235, but the asset has seen more bearish price movement than bullish. Traders will be looking for a clear breakout of these support and resistance levels and a breakout of the upper symmetrical triangle, which is being tested this morning. Currently, indicators are pointing towards upward price movement, but traders are also cautious of the proximity of previous resistance levels.
The news from China and increased investor sentiment towards the market globally is positively influencing the stock market. This is partially due to stronger economic growth and the risks of a declining recession. However, the higher-than-expected inflation is triggering a more restrictive European Central Bank and is negatively influencing the DAX. The European Central Bank is expected to increase interest rates above 4% annually.
Lastly, Pharmaceutical company Bayer AG, included in the DAX, has been negatively affected by their latest earning reports released yesterday. The stock over the past 3 days has declined by 4.75%. The price, so far today, is pointing upwards with clear momentum after the Chinese PMI release. Investors will now focus on tomorrow’s Estimated Inflation figures being released at 12:00 GMT+2. Buyers hope the CPI figures will decline below 8.3%, which may further fuel a bullish rally.
Dow Jones
The Dow Jones and other US indices also positively react to the latest Chinese data. However, fundamental factors and a strong selloff amongst certain companies are pressuring the instrument. For example, the price of Goldman Sachs Stocks declined by more than 3% during yesterday’s New York Session. The stock also declines to its lowest point since January. The latest speech by the CEO on the company’s performance over the past quarter triggered the decline.
Investors must weigh the influences of a strengthening economy and higher interest rates. This afternoon stock traders will focus on the ISM Manufacturing PMI, which will likely remain below 50.0. In addition, all investors will be closely watching speeches made by Federal Open Market Committee members tomorrow. For example, FOMC member Waller will speak tomorrow at 23:00 GMT+2 and most likely comment on interest rates.
Traders looking for further details on technical analysis and the Dow Jones can also watch our latest video below.
Dow Jones Technical Analysis Video March 1st
Summary:
- Chinese PMI data pushes global stock markets higher as Chinese manufacturing grows faster in a decade.
- The DAX increases but underachieves compared to other EU indices. Investors focus on how the asset may break out of the latest support and resistance levels.
- European investors turn their attention to tomorrow’s Yearly CPI figures estimates.
- The Dow Jones increases during this morning’s futures market but remains under pressure from strong sell-offs and higher interest rates.
