Asian stock markets were in a nervous mood on Monday as China’s deepening Covid situation and surging prices weighed on sentiment.
With Shanghai and Beijing both tightening Covid measures, the yuan touched a new 18-month low and Chinese blue-chip shares fell – and adding to traders’ woes was news that China’s exports slumped in April to their lowest level in almost two years.
Chinese export growth slowed to its weakest in nearly 24 months, while imports barely changed last month as tighter and wider Covid curbs halted factory production and crimped domestic demand.
The jitters reverberated across Asian trading floors with Australia, Singapore and Seoul retreating. Tokyo’s Nikkei index closed down more than 2.5%, while China’s two mainland indices – Shanghai and Shenzen – saw a slight lift later in the day.
Indian stocks also fell back with Mumbai’s signature Nifty 50 index down 0.49%, or 80.35 points, at 16,330.90.
China’s blue-chip CSI300 index finished the day down 0.8% at 3,877.44 points while the Shanghai Composite index edged up less than 0.1% to 3,004.14 points.
China liquor makers were among the biggest losers, over concerns over the widening impact of Covid curbs, with a sub-index tracking the sector dropping 2.19%
Chinese automakers also fell after an industry group estimated that sales in April had dropped 48% year-on-year, as zero-Covid policies shut factories, limited traffic to showrooms and put the brakes on spending.
BYD fell 3.86% and Chongqing Changan Automobile fell 3.4%.
The smaller Shenzhen index ended 0.35% higher and the start-up board ChiNext Composite index was weaker by 0.753%. Markets in Hong Kong were closed for a public holiday.
Putin’s War Declaration Threat
Around the region, MSCI’s Asia ex-Japan stock index was 1.23% weaker, while Japan’s Nikkei index closed down.
Tokyo’s key Nikkei 225 index closed down 2.53%, or 684.22 points, to end at 26,319.34, while the broader Topix index lost 1.96%, or 37.52 points, to 1,878.39.
Elsewhere, the dollar rocketed to a new two-decade high as worries about higher interest rates and the tightening lockdowns in China deepened investors’ fears that the global economy is headed for a slowdown.
Central banks in the United States, Britain and Australia all raised interest rates last week, and investors are bracing for more tightening as policymakers try to get on top of soaring inflation.
Adding to those slowdown fears is speculation that Russian President Vladimir Putin might declare war on Ukraine. Putin has so far characterised Russia’s actions in Ukraine as a “special military operation”, not a war.
Despite the sharp rise in rates, not all investors think a slowdown is imminent.
“We continue to believe investors should position for the reality of inflation now, rather than the chance of a recession soon,” UBS Global Wealth Management strategists said.
US Dollar Hits 20-Year Highs
Investors are also tense ahead of the US consumer price report due on Wednesday. Only a slight easing in inflation is forecast, and certainly nothing to prevent the Federal Reserve from hiking by at least 50 basis points in June.
Core prices are actually seen rising by 0.4% in April, the monthly rate accelerating from 0.3% in the previous month, even as the annual pace dips a bit due to base effects.
With investors juggling so many worries, one place they are looking for safety is in the dollar, which is soaring against most other currencies.
The dollar index, which measures the greenback against a basket of currencies, rose as much as 0.4% to 104.19, the latest in a string of 20-year highs.
The soaring dollar is hammering other currencies. The euro dropped back below $1.05 while the Japanese yen fell to its weakest since 2002.
Expectations that the Fed will move more aggressively in raising interest rates are supporting the dollar, as is a sense among investors that the US economy will hold up better than a euro zone hit hard by the fallout from the war in Ukraine.
Oil prices see-sawed after the Group of Seven nations committed on Sunday to banning or phasing out imports of Russian oil over time.
Brent was last quoted down 1.07% at $111.21, while US crude dropped 1.16% to $108.51.
Key figures at around 0720 GMT
Hong Kong – Hang Seng Index > Closed for a holiday
Shanghai – Composite > UP 0.09% at 3,004.14 (close)
London – FTSE 100 > DOWN 0.9% at 7,381.48
Tokyo – Nikkei 225 > DOWN 2.5% at 26,319.34 (close)
West Texas Intermediate > DOWN 0.8% at $108.81 per barrel
Brent North Sea crude > DOWN 0.7% at $111.51 per barrel
New York – Dow > DOWN 0.3% at 32,899.37 (Friday close)
- Reuters with additional editing by Sean O’Meara