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Introduction: Oil and stocks hit by China protests
Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.
Global stock markets are on edge as the protests intensify at major Chinese cities against the country’s stringent zero-Covid rules.
Stocks have fallen across Asia-Pacific markets, while oil has dropped to a near 11-month low, as public demonstrations in cities including Shanghai, Beijing, Chengdu, Wuhan and Guangzhou pose a growing challenge to president Xi’s zero covid policies.
China’s CSI 300 share index fell sharply in early trading, before closing down over 1%. Hong Kong’s Hang Seng is down 1.3% in late trading.
China Markets Slide as Covid Protests Put Investors on Edge
– Goldman sees chance of early, disorderly Covid Zero exit
– Stocks, yuan drop amid worries over social unrest, crackdownhttps://t.co/j8ahzvm2je pic.twitter.com/zj8uiiK55v
— Tom Mackenzie (@TomMackenzieTV) November 28, 2022
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European markets are set to open lower, as concern grows over China protests and i’s signature zero-Covid policy.
Goedemorgen, mn morning call is onderweg. #AEX indicatie is -0,5% en alles staat lager op onrust in China. Dit is om te beginnen Chinese #CSI300 van vrijdag op vandaag pic.twitter.com/HSHzES5GHd
— Arend Jan Kamp (@ArendJanKamp) November 28, 2022
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Overnight, hundreds of demonstrators and police have clashed in Shanghai, as frustration mounts nearly three years into the pandemic.
The record rise in Covid-19 cases has added to public anger, explains Victoria Scholar, Head of Investment, at interactive investor:
“Rare protests have broken out across major Chinese cities in a backlash against the ongoing draconian zero-tolerance to Covid approach from the authorities that has inhibited the freedoms of Chinese citizens since the start of 2020 and that has sharply damaged China’s economic growth.
As a result, international investors have become a lot more cautious towards China with the unrest weighing on the Shanghai Composite, the Hang Seng Index and the Chinese yuan in today’s trade.
In mid-November China reduced its quarantine time for international travel by two days, suggesting that Beijing was finally starting to ease its strict lockdown measures and helping to lift travel and casino stocks amid optimism towards the potential economic reopening.
However that optimism has faded fast with China recording another record high level of covid infections on Monday, adding to the sense of frustration after this weekend’s protests.
ASIAN MARKETS BRACE FOR IMPACT AS CHINA UNREST HITS SENTIMENT; ANYTHING EXPOSED TO CHINA IS 'GOING TO BE VULNERABLE': SAXO
— FXHedge (@Fxhedgers) November 28, 2022
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ASIAN MARKETS BRACE FOR IMPACT AS CHINA UNREST HITS SENTIMENT; ANYTHING EXPOSED TO CHINA IS ‘GOING TO BE VULNERABLE’: SAXO
— FXHedge (@Fxhedgers) November 28, 2022
With optimism about China’s recovery taking a knock, investors are selling out of stocks and oil in favour of safe havens such as dollar, yen and Treasuries.
Stephen Innes, managing partner at SPI Asset Management, explains:
It certainly doesn’t help when many are confined to their apartments watching the World Cup, saw thousands of mask-less fans in Qatar enjoying life that has long been lost in COVID zero haze.
Social discontent could increase in China over the coming months testing policymakers’ resolve to stick to the COVID zero mandates. And since China’s economy is currently in a tug-of-war between weakening macroeconomic fundamentals and increasing reopening hopes.
Mass protests would deeply tilt the scales in favour of an even weaker economy and likely be accompanied by a massive surge in Covid cases, leaving policymakers with a considerable dilemma.
— Tom Hearden (@followtheh) November 28, 2022
n”,”url”:”https://twitter.com/followtheh/status/1597046410792222721?s=46&t=-4C3AAOTtMaleU4LXs63oA”,”id”:”1597046410792222721″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:false,”source”:”Twitter”,”elementId”:”d6036420-4abd-41b8-931c-48c552e0f213″}}”/
Chinese stocks plunge Monday at the open pic.twitter.com/Mv9Yy8VWJs
— David Ingles (@DavidInglesTV) November 28, 2022
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The agenda
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11am GMT: CBI survey of UK distributive trades (retail industry)
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2pm GMT: ECB president Christine Lagarde testifies to the European Parliament’s Committee on Economic and Monetary Affairs
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3.30pm GMT: Dallas Fed Manufacturing Index
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The onshore yuan has closed at 7.1999 to the dollar, the lowest in over two weeks.
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That shows investors are worried how Beijing would react to the wave of protests, at a time when Covid-19 cases are rising at record speed.
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Chris Weston, head of research at brokerage Pepperstone, explained:
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We’re really looking at the government response to what’s happening … the government response is so unpredictable, and of course that just means derisking.
n
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The onshore yuan closed officially at 7.1999 against the dollar at 16:30 GMT, down 384 points from the previous session's official close and 364 points from the previous day's overnight close#forex #forextrader #forexsignal pic.twitter.com/ttcRvEllGt
— FxGecko (@FxGecko_Global) November 28, 2022
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Britain’s blue-chip share index has fallen half a percent at the start of trading.
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The FTSE 100 index has shed 39 points to 7447 points, falling back from last week’s two-month highs.
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Oil giants BP (-2%) and Shell (-1.8) are among the top fallers, along with Asia-Pacific focused financial firms HSBC (-1.3%) and Standard Chartered (-1.6%).
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Mining giants are also in the red, tracking the drop in iron ore and copper prices.
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