Global stocks slip after China’s zero-Covid protests

Global stocks and oil prices fell on Monday after protests in China over the government’s Covid-19 policies weighed on market sentiment and added uncertainty over the outlook for the world’s second-largest economy.

In Hong Kong, the Hang Seng China Enterprises Index fell 4.5% before falling 1.5%. The decline in China’s CSI 300 index of stocks listed in Shanghai and Shenzhen reached 2.8% before being reduced to around 1.1%.

Protests broke out in Beijing, Shanghai and other cities over the weekend against government-induced pandemic restrictions. Discontent has grown since a fire in the city of Urumqi killed 10 people on Thursday, prompting vigils across China as authorities denied claims that coronavirus restrictions had hampered rescue efforts and prevented residents from escaping the fire.

Europe’s regional Stoxx 600 slipped 0.8% by mid-morning on Monday, while London’s FTSE 100 fell 0.5%. The S&P 500 was expected to fall 0.9%, as index-pinned futures suggest, when trading begins on Wall Street.

Oil fell sharply, with Brent, the international benchmark, down 2.8% to trade at $81.31 a barrel, and US marker West Texas Intermediate losing 2.8% to $74.12. .

Traders said the protests added to uncertainty over China’s direction as a rise in Covid-19 cases increased pressure on local authorities to step up enforcement of the strict policy. of President Xi Jinping’s zero Covid.

“Investor confidence has already been damaged this year, and it’s hard to see what the market’s direction will be next,” said Louis Tse, managing director of Hong Kong-based brokerage Wealthy Securities.

Tse said investors were concerned about the lack of additional support for China’s economy as infections hit record highs and undermined a rally that had sent the Hang Seng China Enterprises index up more than 17% this month. this.

The use of blank paper as a symbol of protest against censorship has caused problems for some Chinese listed companies. Shanghai-listed shares of Shanghai M&G Stationery, a paper supplier, fell 3.1% on Monday. He clarified in an exchange filing that a statement circulating on social media claiming the company halted sales of A4 paper “to safeguard national security” was a fake.

The increasingly confused outlook for the Chinese economy also weighed on the renminbi. The Chinese currency fell 1.1% to 7.24 Rmb against the dollar.

The U.S. dollar index measuring the greenback against its international peers fell 0.4% at the start of European trading, benefiting in part from “surging Chinese risk,” said Lee Hardman, currency analyst at MUFG.

Martin Petch, vice president of Moody’s Investors Service, said the protests “have the potential to be credit negative if sustained and produce a more forceful response from authorities.”

“While this is not our base case,” he added, “it would lead to an increased level of uncertainty about the degree of political risk in China, impacting confidence and therefore consumption in an already weakened economy.

The unrest weighed on stocks elsewhere in Asia, with Japan’s benchmark Topix down 0.7%, while South Korea’s Kospi and Taiwan’s Taiex both lost 1.5%.

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