CHINESE STOCKS LEAD GLOBAL STOCKS HIGHER -- CHINESE ETFS NEAR MAJOR UPSIDE BREAKOUTS -- ASIA LEADS EMERGING MARKETS HIGHER -- STRONGER CHINA BOOSTS COPPER PRICES
CHINESE STOCK SOAR... A huge rally in China is leading a rally in stock markets around the world. The red arrow in Chart 1 shows the Shanghai Composite Index surging 5.7% to close at the highest level in more than two years. The SSEC close at 3332 also puts it above its early 2019 high at 3288. In addition, the Shenzhen Index gained 4% while stocks in Hong Kong jumped nearly 4% as well. That's giving a big lift to ETFs linked to China.
CHINESE ETFS ARE ALSO SURGING... Chart 2 shows the China Large-Cap iShares (FXI) jumping 8% this morning, and challenging its early 2020 closing at 44.91. That ETF includes mainland stocks traded in Hong Kong. Chinese stocks traded in the mainland are doing even better.
CHINESE STOCKS TRADED IN MAINLAND ARE DOING EVEN BETTER... Chart 3 shows the Deutsche X-Trackers Harvest 300 China A-Shares (ASHR) jumping 9% and challenging its early 2018 closing high at 34.08. A close above that chart barrier would put the ASHR at the highest level in five years.
CHINA LEADS EM MARKETS HIGHER... Today's surge in Chinese stocks is giving a big boost to emerging markets. Chart 4 shows the MSCI Emerging Markets iShares (EEM) climbing more than 4% to the highest level since February. And well above its 200-day moving average. A stronger Chinese market also boosts commodities.
WEAKER DOLLAR BOOSTS ASIA AND COMMODITIES... Emerging markets are also benefiting from a weaker dollar and stronger Asian currencies, including the Chinese yuan. Rising Chinese stocks are also benefiting commodities like copper closely tied to the Chinese economy. China is the biggest buyer of global commodities.
STRONGER CHINA BOOSTS THE PRICE OF COPPER... That helps explain why the price of copper has been doing so well of late. Chart 5 shows the U.S. Copper ETF (CPER) rising today to the highest level in nearly six months. Copper producers are also rising with Freeport McMoran (FCX) being the day's biggest percentage leader in the S&P 500. Copper producers are also leading materials stocks higher.
RECOMMENDED READING... Please read Martin Pring's July 2 article entitled "The Shanghai Composite Experiences a Historic Breakout" which foresaw today's strong gains.The article also gives a more extensive technical look at the improving Chinese stock market.
