The growth of the Chinese economy is seen as the key factor in the recent rally of U.S. stocks in the market, an analyst said in a note on Monday, Feb. 27, CNBC reported.
"China's growth has been a key driver of asset prices," Keith Parker, head of global equity strategy research at Barclays, said.
According to the report, investors are sometimes unmindful of U.S. stocks as they are often mainly concerned about political developments in the U.S. and Europe.
But Barclay's analysis found that China's economic growth, particularly its shift from old, manufacturing, became a key factor in the performance of currencies, stocks and commodities.
"China nominal growth is at three-year highs," Parker said, adding that "China's fiscal stimulus and the bottom in oil [have] also helped turn the inflation backdrop" away from world concerns on falling prices and slowing growth.
This year, the Shanghai composite climbed 4 percent while the S&P 500 increased by more than 5.5 percent in the same period, the report said.
The economic growth driven by tax cuts, deregulation and the anticipated government spending pledged by President Donald Trump contributed to the gains in the commodities market. Trump said on Monday, Feb. 27, that the U.S. government is planning to spend billions on defense which traders anticipated the following day.
Reports about China, however, were not always favorable. In 2015, Wall Street was worried when stocks in the Shanghai composite index fell more than 40 percent. Investors also became wary of the Chinese government's efforts to prop up the yuan which raised fears of a slowdown in Chinese economy. These concerns caused the U.S. stocks to drop more than 10 percent early last year.
But now, after reports of an improving Chinese economy, the U.S. markets have stabilized. Wall Street investors' confidence has increased as Morgan Stanley and BlackRock have even recommended Chinese stocks for investments in the past weeks.
The report said that Chinese authorities are can now look at the more positive economic outlook ahead of the Communist Party leadership transition this year.