SP 500: selling pressure could resurface

PCE inflation and Powell will likely be key for Wall Street this week

Selling pressure could resurface on global stock markets this week as the outlook continues to deteriorate in China. The impact of the zero covid policy appears to be intensifying on the Chinese economy as profits of the country’s industrial companies fell 3.0% year on year in the first ten months of the year, from 2.3 % during the first nine months of the year, despite the numerous stimulus measures announced by the authorities since the spring.

In addition, the outlook is deteriorating further as the country has just recorded a new daily record for contamination this weekend and protests have broken out in many major cities, including Beijing and Shanghai, after a video broadcast on social networks. Social media showed a woman screaming in a burning apartment tower in Urumqi, the capital of the Xinjiang region.

The deterioration in the global economic outlook can be seen in the fall in oil prices in recent weeks, which the equity markets are currently ignoring. The price of the WTI barrel has just broken through a major support at around $77, now trading at an 11-month plus.

Developments in China will be watched very closely by market participants pending the release of PCE inflation and Jerome Powell’s speech at the Brookings Institute on Wednesday. The Fed Chairman could take advantage of this intervention to calm the euphoria of market operators, as he did in Jackson Hole at the end of August after a relatively similar rebound in the equity market.

S&P 500 daily price chart – key levels


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