Oil breaks US$100, Wall Street retreats and bond yields rise, inflation is becoming the market’s biggest risk again Global markets are starting Thursday in a more defensive position. Brent crude has broken above US$100 a barrel , U.S. Treasury yields are pushing higher, and Wall Street fell for a third straight session as investors reassess whether central banks may need to keep tightening rather than easing. For Malaysian investors, the key chain today is increasingly clear: Oil → inflation → interest rates → bond yields → USD/MYR → Bursa valuations. 30-second market snapshot Market / Asset Latest 🇺🇸 S&P 500 7,636.36, -0.48% 🇺🇸 Dow Jones 52,380.66, -0.77% 🇺🇸 Nasdaq 26,253.34, -0.64% 🇲🇾 FBM KLCI 1,714.34, virtually flat 💵 USD/MYR ~4.06 🇺🇸 U.S. 10Y Treasury ~4.84% 🇺🇸 U.S. 2Y Treasury ~4.42% 🥇 Gold ~US$4,396/oz 🛢️ Brent crude US$101.21/bbl 🛢️ WTI crude US$96.05/bbl ₿ Bitcoin ~US$79,300 🇯🇵 Nikkei ~64,760, -0.6% this morning Brent jumped about 3.4% Wednesda...
JPMorgan Chase & Co has downgraded its recommendation for Chinese stocks from 'overweight' to 'neutral' due to increased volatility ahead of the upcoming US elections, combined with growth challenges and lackluster policy support from China.
Key Points:
US Election Uncertainty: The strategists, led by Pedro Martins, cited concerns about potential renewed trade tensions between the US and China, which could escalate into another "Tariff War 2.0" with tariffs potentially rising from 20% to 60%. This could significantly impact Chinese stocks in the lead-up to the US presidential election in November.
China's Economic Challenges: JPMorgan highlighted "underwhelming" efforts by President Xi Jinping's government to tackle China's economic slowdown. The bank also warned that China's long-term growth may trend downward due to supply-chain relocation, ongoing US-China conflicts, and domestic economic issues.
Revised Growth Targets and Portfolio Adjustments: The bank adjusted its end-2024 base target for the MSCI China Index to 60 (down from 66) and the CSI300 Index to 3,500 (down from 3,900). Additionally, JPMorgan raised the cash level in its China equity model portfolio to 7.7% from 1%, reflecting a more cautious approach.
Broader Economic Outlook: Most global banks now anticipate China's economy to grow less than 5% this year, with JPMorgan's Haibin Zhu cutting the 2024 GDP growth forecast to 4.6%. The market may continue to perform weakly in the coming months, as investors focus on the US election, Federal Reserve rate decisions, and the broader US economic outlook.
JPMorgan's revised stance reflects growing concerns over geopolitical risks and China’s domestic economic challenges, suggesting a more cautious outlook for Chinese equities in the near term.
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