As mounting dissatisfaction in Chinese Covid restrictions sent a shudder through global markets, shares fell while the currency and Treasury bonds climbed. Chinese stocks took the lead in Asia’s stock market falls, while European futures also showed signs of weakness. US contracts decreased as Black Friday sales at American merchants saw steep discounts and only moderate consumer visitation.
Due to demand for haven assets, the dollar gained ground against currencies like Australia’s and South Korea’s, which are strongly dependent on trade with China. Before cutting its losses, the onshore yuan fell as much as 1%.
Bond prices in Australia and New Zealand rose in tandem with the increase in Treasuries. The cost of default insurance for high-rated dollar bonds issued outside of Japan was in the process of increasing for the first time in five days.
According to Gabriel Wildau, managing director at Teneo Holdings LLC in New York, “markets will react badly to the broad protests and mounting case numbers, which are likely to cause new supply-chain disruptions and reduce consumption demand, at least in the short term.”
Due to the developments in China, which punished risky assets and cast doubt on the future of energy demand, oil fell to its lowest point since December, adding strain to the already unstable global crude market.
The stronger dollar put downward pressure on gold, causing it to ebb slightly.
The depressed mood coming from China contrasts with the uptick in optimism in international markets last week after the Federal Reserve’s meeting minutes from November 1-2 showed that the majority of policymakers supported reducing the rate of interest-rate increases.
Focus on Fed
Since the Fed’s most recent meeting, investors have analyzed a plethora of economic data that has partly allayed fears about inflation, supporting the case for further gradual rate increases.
With a 1.5% weekly increase, the S&P 500 reached its highest point since early September. The Nasdaq 100 also managed to post a weekly gain.
This week’s US jobs data and speeches by central bank leaders like Fed Chair Jerome Powell and New York Fed President John Williams will be the focus of attention.
For the second time this year, the Chinese central bank reduced the amount of cash that bankers must have in reserve on Friday amid the country’s difficulties, providing more help for a struggling economy that is being bogged down by Covid controls.
A market strategist at Saxo Capital Markets in Sydney, Jessica Amir, asserted that “Anything exposed to China is probably going to be vulnerable.” Investors will likely show their doubt about the future earnings of Chinese exposed corporations by selling.
This week’s major events:
John Williams of the Fed speaks on Monday
James Bullard’s MarketWatch interview with the Fed on Monday
Christine Lagarde of the ECB speaks to a committee of the European Parliament on Monday
Tuesday’s economic and consumer confidence indicators for the euro area
Tuesday’s US Conference Board consumer confidence
Wednesday’s EIA crude oil inventory report
PMI for China, Wednesday
Fed Chair Jerome Powell’s remarks, and Michelle Bowman of the Fed Talk by Lisa Cook on Wednesday
Fed’s Beige Book is released on Wednesday.
Wednesday: US wholesale inventories; GDP
PMIs from S&P Global, Thursday
US consumer spending, initial claims for unemployment, and ISM Manufacturing on Thursday
Michael Barr, Lorie Logan, and Michelle Bowman from the Fed talk on Thursday
Haruhiko Kuroda, a BOJ, speaks on Thursday
nonfarm payrolls, US unemployment, and Friday
Charles Evans of the Fed speaks on Friday
Christine Lagarde of the ECB speaks on Friday
Several significant market changes include:
Stocks
As of 3:09 PM Tokyo time, S&P 500 futures were down 0.7%.
Nasdaq 100 futures decreased by 0.9%.
Euro Stoxx 50 futures decreased by 0.6%.
Topix Index decreased by 0.7%.
S&P ASX Index decreased by 0.4%.
The Hang Seng Index decreased by 2.1%.
Shanghai Composite Index decreased by 1.4%.
Currencies
By 0.3%, the Bloomberg Dollar Spot Index increased.
To $1.0357, the euro declined by 0.4%.
Japanese yen increased by 0.7% to 138.22 yen per dollar.
To $7.2273 per dollar, the offshore yuan decreased by 0.5%.
To $0.6677, the Australian dollar dropped 1.1%.
Cryptocurrencies
BTC dropped by 2.5% to $16,152.68.
To $1,167.61, ether dropped 3.9%.
Bonds
Ten-year Treasury yield fell four basis points to 3.64%.
The 10-year yield in Australia dropped by six basis points to 3.52%.
Commodities
To reach $74.05 a barrel, West Texas Intermediate crude lost 2.9%.
To $1,750.18 per ounce, spot gold decreased by 0.3%.
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