Geopolitical headlines have created some volatility in the Chinese blue chip share index.
CHINA 50 – Daily Chart
The price of the CHINA 50 index was at risk of falling back into the previous trading range, but is back above resistance at 13,807. That is now the key support level after the recent uptrend line break.
Chinese shares suffered early last week after Russia and the United States continued a war of words over Ukraine. Weaker manufacturing data in China was also a drag on the country’s top stocks.
China’s factory activity reading showed a contraction in July as softer new orders forced manufacturers to scale back production and staffing, according to S&P Global. The manufacturing Purchasing Managers’ Index fell to 49.5 in July from 50.4 in June, after businesses had ramped up orders ahead of the U.S. tariffs.
A reading below the 50 level implies a contraction, and that is not ideal news for the country’s mixed recovery. Falling production and a stable order backlog prompted factory owners to lower their headcount in July. Cost concerns were another reason that managers had cut staff, according to the survey.
Beijing started to focus on “price wars” among manufacturers as average input prices rose for the first time in five months. Companies were still seen lowering prices again as competition intensified. But the tariff fallout is leading to volatility in export charges, with rising shipping and logistics costs.
The latest price action for the Chinese stock market indicates some risk from global tensions, as tariffs continue to erode global demand for manufactured goods. The focus now moves to the summit between U.S. President Trump and Russian President Putin. A peace deal between the two could create a global market rally.
Shares were higher in Asia on Monday despite being one day away from Trump’s deadline for imposing higher tariffs on goods imported from China. Previous talks led to a 90-day extension, but there has been no confirmation on the latest plan.
Another extension is possible, but without that, the China 50 could move back into the previous trading range.
