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How do China’s economic expectations affect global markets?

Autor: Monica Preda
2 min

US stocks have recently stopped rising, with the Dow Jones Industrial Average falling by 62.75 points or 0.18% to close at 35,088.29 points. The S&P 500 index also fell by 0.20%, closing at 4,538.19 points, and the Nasdaq index fell by 0.59% to reach 14,199.98 points, thus breaking all Wall Street indicators’ series of five consecutive increases.

Therefore, I expect Asian stocks to fall as the rise in US indicators stops after the minutes of the Federal Reserve meeting confirmed the central bank’s cautious approach. Nvidia Corp’s shares fell yesterday after investors were disappointed with its quarterly results.

In my opinion, the strong growth prospects for Asian corporate profits in 2024 seem unrealistic as regional corporate profit expectations for the next 12 months have fallen due to the sluggish economy in China, coinciding with disappointing third-quarter earnings results and rising interest rates.

I believe that the current stock market pricing is ideally transitioning to realism. Therefore, we must be extremely cautious as we make investment decisions from the end of November to the end of December 2023. The minutes of the Federal Reserve meeting confirmed last night that officials are still not ready to announce the end of current inflation control measures, and there is no intention yet to ease monetary policy or lower interest rates soon. This increases negative pressure on stock markets in the short and medium term.

Especially since profit growth is expected to slow down in 2024 in most parts of Asia, especially China, but China’s profit estimates for 2023 have been reduced to 18% now from 24% in August. I think this is due to the real estate and services crisis after economic data results came in lower than expected, and in my opinion, this justifies the stagnant market today, coinciding with the entry of prices at the peak of short-term buying.

I expect the S&P 500 indexes to reach a new high in 2024 because US companies have adapted to high interest rates and overcome macroeconomic crises. I see prices reaching a new peak level of 5,000 points by the end of 2024. This is about 10% higher than the current price, especially since the pricing of government bond yield futures.