Why investors need to take care with China’s hot stock market

It’s probably a good thing that the 10 -year anniversary of that S&P 500 nadir falls on a Saturday, given the extra gloom seen on Friday—compounded by China exports and German factory orders tanking.

Of course, any doubts we had about how dire things are looking in Europe all but vanished Thursday as the ECB got in deep with the doves, slashing growth expectations, tossing more cheap money at banks and vowing to keep interest rates lower for a lot longer.

A pick-me-up from Wall Street may not be in the offing, with coming jobs data expected to show less cheery numbers versus the last two months, barring any surprises. Global equities are doing a hard south turn, which is not helping the mood, as downbeat China data drove the worst losses since October for the Shanghai Composite.

The problems are not limited to China data though. Our call of the day, from big China brokerage Citic Securities, appears to also have influenced the region’s stocks Friday, and could be a warning in the canary for investors eager to get a piece of the world’s best-performing market this year.

Read: The best strategy to recover from a stock-market bottom is one you already know

Late Thursday, Citic issued what’s being described as a “rare,” first-time sell rating on state-owned People’s Insurance Group of China














601319, -9.98%












warning investors those shares are overvalued as the price of the insurer has soared in recent weeks.

“We think the stock could potentially fall more than 53.9 percent over the next year,” said Tom Chengdun and a team of analysts, according to Reuters and other media outlets. This move is odd because analysts in the region want to keep getting information from companies so it’s not in the interest to come down hard on them, says Reuters.

Those shares responded by tanking 10%, and as weak export data piled on, the Shanghai Composite finished down over 4%.

Investors have been creeping back into China, after the main market there tumbled nearly 25% for 2018, far worse than the 4% drop for the S&P 500. Where it led the downturn last year, the Shanghai Composite has been outpacing a rally for global equities this year, up nearly 20% even as some worry that a protracted trade spat with the U.S. will hurt the economy.

“The 20.7% decline in February exports marked the steepest fall in three-years, and while some will reference seasonal factors, this is clearly a hugely important number to prove the damage the U.S.-China trade war is having,” noted Josh Mahoney, senior market analyst at IG.

Of course China is piling on with stimulus and some think that will help markets there in the end. Recall that earlier this month index provider MSCI said it would lift the weighting of China-listed shares, which could bring a big influx of capital to the region. And that means more exposure for international investors, including the U.S.

In a recent note, analysts at Morgan Stanley doubled down on a bullish stance on China stocks. Economic stimulus, plus trade talk hopes are among the things they think will propel the index higher. But they say all bets are off if stimulus doesn’t get any traction and a trade deal cant’ get sorted—see buzz for the latest on that saga.

Read: Former presidential candidate turns $100,000 into $2.5 million

Read: Jeremy Grantham, who predicted 2000 crisis sees 2% returns in next 20 years

The market

Dow














YMH9, -0.48%












S&P 500














ESH9, -0.45%












 and Nasdaq














NQH9, -0.54%












 futures are all trading in the red, after Thursday’s downbeat session for the Dow














DJIA, -0.78%












S&P 500














SPX, -0.81%












 and Nasdaq














COMP, -1.13%












For more, check out Market Snapshot.

Investors are taking shelter in the yen














USDJPY, -0.39%












which is weighing on the dollar














DXY, -0.17%












while gold














GCJ9, +0.61%












 is also getting bid higher. Crude














CLJ9, -2.15%












is taking a hit.

Europe stocks














SXXP, -0.80%












 are largely down across the board, and Asia was downright ugly, with the Shanghai Composite














HSI, -1.91%












 tumbling 4% and the Nikkei














NIK, -2.01%












 dropping 2%, even after strong Japan growth data.

The economy

Nonfarm payrolls, the unemployment rate and average hourly earnings are all coming our way this morning, and economists expect big job gains of the past two months won’t be repeated. At the same time, we’ll get housing starts and building permits. Then, wholesale inventories and after the market closes, a speech on monetary policy from Fed Chairman Jerome Powell. He’ll also appear Sunday evening in a “60 Minutes” interview.

The chart

Our chart of the day comes from Maleeha Bengali, founder MB Commodity Corner Ltd & AWAAM Consulting LLC, a wealth advisory firm in Dubai, who tweeted out the following chart that shows flattening U.S. manufacturing orders against tumbling Chinese exports.

“If China exports fell drastically, how do we think U.S. data will look? if 4.64 trillion yuan injection didn’t help, what on earth is the Shanghai Composite and $SPY














SPY, -0.84%












 pricing, Trump positive tweets?”

And just to get a better look at what that dismal Chinese trade data looks like, here’s a chart from The Wall Street Journal’s Daily Shot:

The buzz

Following on from Thursday’s news snippets that a trade deal may be tough going. The U.S. envoy to China, Terry Branstad, told The Wall Street Journal on Friday that a date for a summit hasn’t been set because the two sides aren’t close enough to an agreement.

Tesla














TSLA, +0.13%












 will get around a half-billion dollars to invest in its Shanghai factory after a deal with Chinese lenders. Meanwhile, the Pentagon is reviewing security clearance for the electric-car maker’s CEO Elon Musk after his pot-smoking incident last September.

Mostly bad news in after hours, Eventbrite














EB, +3.15%












 is plummeting on a miss and weak outlooks are hitting Marvell














MRVL, -2.19%












 and Okta














OKTA, +1.54%












 shares, but Costco














COST, -1.11%












 is up on an earnings beat.

An Amazon














AMZN, -2.58%












 -led group of investors, including the New York Yankees is reportedly nears a deal to buy cable sports channel YES Network for around $3.5 billion.

CEO Nick Caporella of LaCroix sparkling water maker National Beverage Corp.














FIZZ, +1.11%












blames poor results on “injustice,” and comparing the management of a brand to “caring for someone who becomes handicapped.”

Early reviews are in for Disney’s














DIS, -0.73%












 “Captain Marvel” and most are loving the franchise’s latest superhero.

On International Women’s Day, where the theme is #balanceisbetter tributes are pouring in from Google and several international brands.

The quote

“There are people from neighborhoods like mine in America who get convictions for doing things that two of the last three presidents admitted to doing.”—That was Dem. Sen. Cory Booker (NJ), telling The Late Show’s Stephen Colbert just what he thinks about what some view as lenient sentencing for Trump’s former campaign chairman Paul Manafort, who got 47 months in the slammer for tax and bank fraud.

“In our country we prey on the most vulnerable citizens in our nation, poor folks, mentally ill folks, addicted folks and overwhelmingly black and brown folks,” added Booker, as Monica Lewinsky and others chimed in on how easy Manafort got off.

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