Bullish Momentum Builds as Chinese Markets Eye the 3,900 Resistance Level

Global markets have set a constructive tone for Asian trading, with Wall Street delivering its fifth consecutive session in positive territory. The major U.S. indexes posted solid gains on Friday—the Dow Jones surged 289.30 points (0.61%), NASDAQ climbed 151.00 points (0.65%), and the S&P 500 advanced 36.48 points (0.54%)—extending the week’s rally with the NASDAQ up 4.9%, S&P 500 higher by 3.7%, and Dow gaining 3.2%.

This upside momentum stems from renewed confidence about interest rate trajectories, particularly following dovish signals from Federal Reserve officials. The CME FedWatch Tool currently shows an 86.9% probability of a quarter-point rate cut at December’s policy meeting, fueling optimism across asset classes.

China’s Stock Market Poised for Further Upside

Against this backdrop, the Shanghai Composite Index approaches a critical juncture. After rallying approximately 25 points (0.6%) over two consecutive sessions, the index trades near the 2,890-point level and appears set to extend gains at Monday’s open, with the 3,900-point resistance level emerging as the next focal point for bulls.

Friday’s session saw the Shanghai Composite finish at 3,888.60, up 13.34 points or 0.34%, trading between 3,856.25 and 3,888.89. The Shenzhen Composite Index showed stronger momentum, surging 23.27 points or 0.96% to settle at 2,453.81.

Banking and Financial Sector Headwinds

The financial and property sectors weighed on broader gains, offsetting strength in resource stocks. Among the banking heavyweights, weakness was widespread: the Agricultural Bank of China declined 0.74%, Industrial and Commercial Bank of China retreated 0.61%, Bank of Communications dropped 1.56%, and Bank of China stumbled 1.62%. China Merchants Bank eased 0.56%, while China Life Insurance fell 0.98%.

Resource Stocks Lead the Charge

Commodity-related equities provided the primary lift. Jiangxi Copper rallied 1.49%, and Aluminum Corp of China (Chalco) added 0.67%. However, energy stocks showed mixed signals, with Yankuang Energy losing 0.64%, PetroChina sliding 1.02%, Sinopec declining 0.52%, Huaneng Power tanking 1.77%, and China Shenhua Energy sinking 0.75%.

Real estate names also underperformed, with Gemdale slumping 1.14%, China Vanke tumbling 1.65%, and Poly Developments easing just 0.15%.

Market Drivers: Rate Optimism and Geopolitical Uncertainty

The positive global backdrop reflects shifting expectations around monetary policy easing. However, trading volumes remained somewhat restrained as market participants observed the post-Thanksgiving holiday period, keeping some traders sidelined.

On the commodity front, crude oil prices edged higher as a proposed Russia-Ukraine peace settlement remains unresolved. West Texas Intermediate crude for January delivery rose $0.18 or 0.31% to $58.83 per barrel, providing modest support to energy equities.

With Chinese markets approaching the 3,900-point resistance level and international risk sentiment turning constructive, the coming sessions could prove decisive for determining whether bulls can breach this technical hurdle and establish a higher trading range.