China markets end week mixed as AI stocks swing, agriculture shares hold firm: analyst

Chinese mainland markets closed the week with mixed performance, featuring volatile rotation in AI-related growth stocks amid shifting sentiment, while defensive agricultural sectors sustained steady strength, mirroring uneven trends in the latest industrial profit data, China Global Television Network (CGTN) market analyst Timothy Pope said on Friday.

Chinese stocks closed lower on Friday, with the benchmark Shanghai Composite Index down 0.11 percent to 3,952.18 points.

The Shenzhen Component Index closed 0.68 percent lower at 13,953.07 points.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, dropped 1.41 percent to close at 3,424.40 points.

The STAR Composite Index, which reflects the performance of stocks on China's sci-tech innovation board, closed 1.57 percent lower at 1,942.91 points.

"The Chinese mainland markets ended the week a bit mixed today. The Shanghai Composite dipped 0.1 percent. The Shenzhen Composite was down 0.7 percent. The ChiNext board lost 1.4 percent. But the Shanghai Composite did still manage to gain about 1.2 percent over the course of the week. I think we can now describe the volatility that we've been seeing in growth stocks is something of a trend in the mainland markets -- these very violent rotations in and out of AI and adjacent sectors. We started the week with a rout, with some of the biggest AI hardware names falling 7, 8, even 10 percent in that single session. Then, Nvidia's very strong earnings in the US helped trigger a sharp rebound on Thursday, particularly for semiconductor, optical modules, and other AI infrastructure stocks. And then today some of those sectors came under a bit of pressure again, so investors still clearly believe in the long-term AI-growth story, but they are also pretty quick to take profits when valuations start looking stretched," he said.

"Interestingly, the industrial profit data this week told quite a similar story. Overall, industrial profits were up strongly in the first seven months of the year. But a huge amount of that strength came from high-tech manufacturing. Electronics profits were up more than 100 percent, while sectors like auto manufacturing were much weaker. So the economic data is reflecting some of the same imbalance that we're seeing in the stock market," Pope said.

Pope also pointed to continued strength in agriculture and food security stocks, suggesting the trend may be gaining staying power.

"One trade, though, which has been much more consistent is agriculture. We've seen agriculture and food security stocks remain strong again today, extending gains that we saw at the end of last week. That trade has now lasted long enough, I think, that it looks less like a one-day defensive move and more like a theme that investors are actively sticking with," he said.

China markets end week mixed as AI stocks swing, agriculture shares hold firm: analyst

U.S. Federal Reserve Chairman Kevin Warsh said Friday that the Fed's predominant focus right now should be on prices, as inflation remains above its 2-percent target.

Speaking at the annual Jackson Hole Economic Policy Symposium, Warsh said, "On the price stability side of our mandate, the numbers are more concerning."

Warsh's remarks came as broad inflation measures have fallen from their 2022 peaks, though Warsh characterized the progress over the past two years as modest. He pointed specifically to the Personal Consumption Expenditures (PCE) price index, noting that "the numbers are more concerning."

While summer inflation readings were better than expected, Warsh stressed that they do not indicate a meaningful improvement in underlying trends.

The Federal Reserve's preferred inflation gauge came in slightly above expectations, with the annual inflation rate holding steady at 3.7 percent, data released by the Commerce Department showed on Wednesday.

The PCE price index increased by a seasonally adjusted 0.2 percent for the month, slightly exceeding expectations, while core PCE inflation, which excludes volatile food and energy prices, matched forecasts with a 0.2 percent monthly increase and a 3.3 percent year-over-year rise.

In contrast to the lingering inflation challenges, Warsh painted a robust picture of the broader U.S. economy.

Looking ahead, Warsh emphasized that the central bank will remain "keenly focused on market internals" and performance across various sectors. He pledged to continue tracking changes in the growth rates of corporate earnings and capital spending, as well as their follow-on effects on asset prices, business confidence, consumer income, and spending.

Following the speech, major U.S. stock market indexes remained little changed, while Treasury yields moved substantially higher as bond investors digested the hawkish undertones regarding inflation and economic strength.

Warsh says Fed should focus on prices as U.S. inflation remains above target