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Power Lunch

Power Play: Signs of a turnaround in China

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The Shanghai Composite surged 3 percent on Tuesday following positive news on the yuan and new bank loans in China.

Hugh Johnson Advisors Chairman and CIO Hugh Johnson tells CNBC's "Power Lunch" he sees some small signs of a turnaround in China.

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"We are starting to see the first very, very faint signs of a turn in prospects for China. Leading economic indicators for China (from OECD) improved in November and December and the consensus forecast for 2017 growth 'upticked' for first time in 12 months from 6.2 percent to 6.3 percent," Johnson said.

He still believes the key risk to the markets is China, but he doesn't see a slowdown there leading to a recession in the United States.

"The slowdown in China is clearly being transmitted throughout the globe through (a) declining commodity prices and (b) declining trade flows from U.S. to commodity dependent countries (Canada, Mexico, Brazil, Australia, Indonesia, and Russia). However, the deterioration in China is not significant enough to derail the U.S. stock market-economic-interest rate cycle," Johnson said.

Year-to-date, the Shanghai Composite is down nearly 20 percent.