China PMI
Image courtesy of Shutterstock

China PMI Preview: Stocks Hope for a Lifeline as Fed Rate Cut Speculation Fizzles

By:Ilya Spivak

Stocks markets are on the hunt for a new catalyst as the tailwind from Fed rate cut expectations fades. Improving Chinese economic data may be insufficient.

  • Global equities stopped rising after this month’s Fed policy announcement.
  • Markets with more dovish central banks have outperformed, and vice versa.
  • China may not revive risk appetite even as PMI data points to improvement.

The Federal Reserve stopped the global stocks rally in its tracks with this month’s policy announcement.

Since March 21, the day after the U.S. central bank’s conclave, the ACWI ETF tracking the MSCI All-Country World stock index is flat. Emerging market shares (ETF: EEM) have seen outsized losses, down 0.4%. Most of that downdraft came from a 1.9% decline in China (ETF: ASHR).

For developed markets, the U.S. has stood out as a pocket of weakness. The catch-all S&P 500 (ETF: SPY) is trading close to flat, up less than 0.1%. However, the tech-heavy Nasdaq 100 index (ETF: QQQ) has shed a heftier 0.8%. That’s eye-catching: most of the leaders powering the global equities rally since late October are U.S. tech names.

Global stock markets trade on interest rate cut expectations

Despite a dovish tilt relative to market expectations, the Fed’s latest guidance seemed to kill the tailwind for risk appetite from rate cut speculation. That this is behind overall stock market weakness seems to be borne out by the performance of developed markets outside the U.S.

Global stock market ETFs
Source: tastytrade

Shares in Japan (ETF: EWJ) are down after the central bank raised interest rates for the first time in 17 years. By contrast, the United Kingdom (ETF: EWU) outperformed, rising 0.8% as the Bank of England (BOE) inched closer to rate cuts (as expected).

Eurozone stocks (ETF: EZU) gained 0.3%. The markets have priced in more rate cuts from the European Central Bank (ECB) than any of its major peers, looking for 87 basis points (bps) this year.

If the upward impetus from hopes for a more dovish Fed has gone (at least for now), the search for fresh fodder has almost certainly commenced. A reassessment of the global economic growth trajectory is a logical starting point. With that in mind, incoming purchasing managers index (PMI) data from China may be instructive.

Searching for good news: China to the rescue?

The China Federation of Logistics and Purchasing (CFLP) is expected to report the fifth-consecutive month of acceleration in the service sector, putting the pace of activity growth at the highest since June 2023. On the manufacturing, another month in the red is nevertheless seen marking the slowest pace of contraction in six months.

Data from Citigroup suggests that Chinese economic data outcomes converged market-watchers’ baseline expectations by mid-October 2023 have remained pinned there since. This argues for broadly in-line results. PMI data from the U.S. and the Eurozone last week was similarly middling. Absent surprises to the upside, a fillip for risk appetite may have to come from elsewhere, if at all.

China PMI
Source: CFLP, NBS

Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.