Tracking the Bears in China

panda eating bamboo

Global economic and financial issues are back in the forefront. Turkey’s been the main story in the last week, but today China has some important headlines.

Simply put, they’re all negative. The country’s economic reports for July had a triple-miss overnight:

  • Industrial production rose 6 percent, below the 6.3 percent consensus estimate.
  • Fixed investment rose 5.5 percent, while forecasters were looking for 6 percent. Reuters said this was the lowest reading in at least 22 years.
  • Retail sales grew 8.8 percent, versus an expected 9.1 percent gain.

U.S. President Donald Trump’s trade dispute with Beijing is the main problem, casting a pall over the country’s business confidence and investment. However, not all the blame is found at 1600 Pennsylvania Avenue. Other stories in the last 24 hours also seem to hurt the Chinese growth story. In particular, sellers are active in the Asian giant’s sprawling technology sector.

  • Look at streaming-video stock YY (YY) and its video-game publishing affiliate Huya (HUYA). Both are cratering more than 12 percent on signs of rising costs.
  • Chinese e-commerce firm Vishop (VIPS) is also getting crushed after profit and revenue lagged estimates.

Looking beyond just China, it should be noted that Europe had some decent news overnight. Euro zone and German gross domestic product both beat estimates. And, Germany’s Zew confidence index rose much more than expected this month. However the region’s equities have been under pressure for months. Looking forward, the market sees near-term risk from the Turkey’s meltdown and longer-term risk from Italy’s budget.

RadarScreen showing 1-month changes on select securities

The RadarScreen® above shows the impact on some key symbols related to the global theme. Notice how securities like the Australian dollar and Chinese tech stocks are down 10-20 percent from their 52-week highs, while domestically focused items like the Russell 2000 ETF are close to record territory.

Going forward, the next big event traders may want to watch could be on August 20-23, when the U.S. government reviews its tariffs against China. Meanwhile energy stocks continue to bleed lower.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.