Global financial markets are ravaging radical changes that are being driven by trends in China and India. Investors are looking shrewdly into the $24,100-$24,230 demand zone. This area has recently received attention due to its sturdy anchored VWAP support and the VAL confluence. These elements, in tandem with ongoing geopolitical tensions and key economic data releases, are creating a very volatile September.
China’s recent breakout in key market indices would help to re-energize global risk appetite. This CHN50 index, which had pierced steadily upward for most of the year, is currently retesting the bottom of $15,000. The increase is fueled primarily by the rise of Chinese AI and semiconductor shares. China’s desire for technological independence is providing it with added momentum. If China pierces through this key level of global resistance, consequences for world markets might be nothing short of catastrophic.
There are stories hurting India that could cut against emerging market flows. Additionally, the U.S. has recently doubled tariffs imposed on the majority of Indian exports, raising them from 25% to 50%. This change applies to trade worth more than $87 billion. The escalating trade tensions will likely cool investor appetites for emerging markets. Such a policy turn would be likely to weigh on the relative performance of U.S. small caps and cyclical stocks.
Economic Data and Federal Reserve Influence
How the Federal Reserve reacts to robust incoming economic data will be key in determining the September market sentiment. Recent revisions to Q2 U.S. GDP showed a stronger-than-expected growth rate of 3.3%, indicating resilience in the economy. As investors continue to digest this information, all eyes are still on the key indicators, including the Personal Consumption Expenditures (PCE) index.
With July’s PCE data expected to be flat at 2.6%, market analysts expect the Core PCE to rise to 2.9%, its highest figure since February. The new accelerating core inflation trend may force the Fed to reconsider its current monetary policy course. As of today, markets are pricing in an 85-90% likelihood of a 0.25% cut to interest rates in September.
U.S. equities are increasingly sensitive to data releases. Traders will at times keep on these anticipated PCE, CPI and employment reports. The implications of these labor market reports will likely determine what the Fed will do next and eventually shape market conditions.
Impact of Tariffs and Emerging Markets
India’s recent imposition of much higher tariffs on exports is likely to be the first major litmus test of investor confidence in emerging markets. The U.S., in turn, is increasing its tariffs on Indian imports. Such a step would risk a significant capital flight from both economies. This cooling effect would greatly benefit U.S. small-cap stocks compared to their larger peers. That would be especially damaging to cyclical sectors that are highly dependent on robust global economic activity.
Investors are keenly aware that India’s economic struggles could dampen enthusiasm for emerging markets, particularly as they assess the potential fallout from heightened tariffs and trade tensions with the U.S. The external environment of uncertainty and instability should result in growing turbulence on global markets.
China’s market is becoming more powerful as its tech industry continues to grow. Even more problematic is that regional disparities in economic performance may further confound investment strategy. Investors may soon be forced to operate in an environment where geopolitical considerations are at least as important as economic underpinnings.
The Path Ahead for Investors
As international markets brace for their impact, investors need to be on their toes. How the balance between economic data, geopolitical tensions, and market sentiment plays out will most likely determine the trading strategy over the next few weeks.
This demand zone, ranging from $24,100 to $24,230 will likely be an important zone for traders to consider entering and getting long. The anchored VWAP support and VAL confluence provide strong potential stability in this range. This further establishes India’s geopolitical position as a key strategic entry or exit point, based on how things continue to develop in China and India.
While markets try to time the Fed’s next move, economic data is all over the place. So investors may want to prepare themselves for some September fireworks. It’s those factors that will have a significant effect on each specific asset class. They will set the tone for market confidence across the world, at home and abroad.