Asia stocks were on the slide again as rising Covid-19 cases in China darkened the mood on trading floors already preoccupied by the threat of recession.
Beijing’s most populous district urged residents to stay at home on Monday as the city’s Covid case numbers rose, while at least one district in Guangzhou was locked down for five days.
That only added to general ill-feeling among investors worried about rising inflation and central bank tightening, particularly in the US.
Japan’s Nikkei managed to hold on to some small gains but the worsening Covid situation in China dominated the session.
Japan’s Nikkei share average was flat, as was the broader Topix, though volumes were expected to be light due to US and Japanese holidays later in the week.
The benchmark Nikkei 225 index gained 0.16%, or 45.02 points to end at 27,944.79. The Topix index was up 0.28%, or 5.54 points, to 1,972.57.
“Financial markets are trying to find the balance between the room for further rate hikes versus the extent to which the US and global economy will slow,” said Masayuki Kichikawa, Chief Macro Strategist at Sumitomo Mitsui Asset Management.
The rash of fresh Covid outbreaks across China has been a setback to hopes for an early easing in strict pandemic restrictions, one reason cited for a 10% slide in oil prices last week.
Chinese blue chips fell 1.5% in early trade, dragging MSCI’s broadest index of Asia-Pacific shares outside Japan down 1.3%.
The Shanghai Composite Index dipped 0.39%, or 12.20 points, to 3,085.04, while the Shenzhen Composite Index on China’s second exchange dropped 0.04%, or 0.81 points, to 2,028.51.
Meanwhile, Hong Kong’s Hang Seng Index dropped 1.87%, or 336.63 points, to close at 17,655.91.
US Thanksgiving Holiday to Thin Trading
Elsewhere across the region, South Korean stocks lost 1.1% while Indian stocks fell with Mumbai’s signature Nifty 50 index down 0.81%, or 147.70 points, to close at 18,159.95.
Globally, S&P 500 futures were down 0.4%, while Nasdaq futures slipped 0.3%. EUROSTOXX 50 futures lost 0.3% and FTSE futures 0.2%.
The US Thanksgiving holiday on Thursday, combined with the distraction of the football World Cup could make for thin trading this week, while Black Friday sales will offer an insight into how consumers are faring and the outlook for retail stocks.
Minutes of the US Federal Reserve’s last meeting are due on Wednesday and could sound hawkish, judging by how officials have pushed back against market easing in recent days.
There are at least four Fed officials scheduled to speak this week, a teaser ahead of a speech by Chair Jerome Powell on November 30 that will define the outlook for rates at the December policy meeting.
Bond markets clearly think the Fed will tighten too far and tip the economy into recession as the yield curve is at its most inverse in 40 years.
On Monday, 10-year note yields of 3.81% were trading 71 basis points below the two-year.
Central banks in Sweden and New Zealand are expected to hike their rates this week, perhaps by an outsized 75 basis points.
Crypto Turmoil Continues After FTX Fall
The Fed chorus has helped the dollar stabilise after its recent sharp sell-off, though speculative positioning in futures has turned net short on the currency for the first time since mid-2021.
On Monday, the dollar was little changed at 140.31 yen, after last week’s bounce from a low of 137.67. The euro eased a touch to $1.0313, well short of the recent four-month top of $1.1481.
The US dollar index firmed 0.2% to 107.080, and away from last week’s trough of 105.300.
Meanwhile, turmoil in cryptocurrencies continued unabated with the FTX exchange, which has filed for US bankruptcy court protection, saying it owes its 50 biggest creditors nearly $3.1 billion.
In commodity markets, gold was a fraction lower at $1,747 an ounce, after dipping 1.2% last week.
Oil futures failed to find a floor after last week’s drubbing saw Brent lose 9% and WTI roughly 10%.
Tokyo – Nikkei 225 > UP 0.16% at 27,944.79 (close)
Hong Kong – Hang Seng Index < DOWN 1.87% at 17,655.91 (close)
Shanghai – Composite < DOWN 0.39% at 3,085.04 (close)
London – FTSE 100 < DOWN 0.24% at 7,368.07 (0935 GMT)
New York – Dow > UP 0.59% at 33,745.69 (Friday close)
- Reuters with additional editing by Sean O’Meara