Covid-related protests in China weigh on markets

written on November 28, 2022

The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects. When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks. The medium- to long-term consequences, on the other hand, could be significant. It is possible that we are at the beginning of a new bloc formation or a new Cold War. This would put a significant damper on globalization and further fuel higher structural inflation. 

In what is traditionally a slower week with Wall Street closing for Thanksgiving, the financial markets once again recorded a positive weekly performance, following confirmation that the pace of rate hikes could soon ease in the US and Europe. However, central banks warned that there was still some way to go to curb inflation and that further rate hikes would be necessary. For the week, the Dow Jones Industrial Average jumped 1.8%, the S&P 500 rose by 1.5%, and the Nasdaq Composite gained 0.7%. In Europe, the Euro Stoxx 50 advanced for the sixth straight week, gaining 1.3% over the past five days.

Summary

  • Asian equity markets fell sharply on Monday as widespread protests against strict Covid restrictions and surging daily Covid cases in China dampened investor sentiment. Shares in Hong Kong and mainland China led the decline, while Australian, Japanese and South Korean shares also posted notable losses. Meanwhile, Goldman Sachs said China could end its Covid-zero policy before April, earlier than widely expected. 
  • European and US equity futures slipped this morning, weighed down by weak global sentiment following news of growing unrest in China over Covid restrictions, while subdued Black Friday shopping in the US added to the bearish mood. 
  • Oil tumbled to the lowest level since December as unrest in China hurt investors’ appetite for risk and weighed on the outlook for energy demand, adding to stresses in an already fragile global crude market. West Texas Intermediate sank below $75 a barrel after three weeks of losses. 
  • Profits earned by China’s industrial firms declined by 3% year-over-year in the first ten months of 2022, steeper than a 2.3% drop in the previous period, amid a record high of Covid infections, with more cities imposing strict curbs, weakening consumption, and a deepening property crisis. 
  • Consumers spent a record $9.12 billion on online shopping during Black Friday this year, according to Adobe, which tracks sales on retailers’ websites. Overall online sales for the day after Thanksgiving were up 2.3% year-over-year, and electronics were a major contributor, as online sales surged 221% over an average day in October.   
  • Shares of Activision Blizzard saw pressure last Friday after Politico reported that the Federal Trade Commission is likely to file an antitrust lawsuit to block Microsoft’s $69 billion takeover of the video game maker. If regulators decide to move forward with the case, it could come as soon as next month, according to people familiar with the investigation. 
  • It will be a very busy week ahead in the US with the labour report taking the central stage, followed by speeches by several Fed officials, 2nd estimate of GDP growth, ISM manufacturing PMI, CB consumer confidence, and personal income and spending. Also, attention will be given to inflation rate releases for Euro Area, Germany, France, Italy, Spain, and South Korea. Finally, Q3 GDP growth rates will be published for Canada, Turkey, India, Brazil, and Switzerland, and Manufacturing PMIs for China, Canada, India, South Korea, and Australia. 
mobile-devices-pod
mobile-devices-pod

Redefine the way you grow and manage your money today!

Life’s full of mysteries. Your money shouldn’t be one of them.
mobile-devices-pod
mobile-devices-pod

Redefine the way you grow and manage your money today!

Life’s full of mysteries. Your money shouldn’t be one of them.