SYDNEY (Reuters) – Stocks and commodities fell sharply on Monday as rare protests in major Chinese cities against the country’s draconian coronavirus curbs raised investor concerns about the growth implications for the world’s second-largest economy.
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) It fell 1.5% after falling 2.2% at the open, and was lowered by the slump in the Chinese markets.
Hong Kong Hang Seng Index (.HSI) It lost 4.16% in early trading, but regained some ground, down from 2.32%. Chinese CSI300 Index (.CSI300) It was down 1.8% after opening down 2.2% while the yuan also weakened.
Georges Boubouras, CEO of K2 Asset, said: “Clearly, the harsh lockdowns in China have weighed on consumer and business sentiment for some time, and the sustained decline in China’s GDP rating has been flat for over a year now with more downgrades to come. “. Management in Melbourne.
“Markets do not like uncertainty and investors will be looking for some clarification of China’s harsh domestic lockdown protocols.”
Concerns about China’s economic growth also weighed on commodity markets.
Oil remained deep in negative territory on Monday, with US crude falling 3% to $73.99 a barrel and Brent crude falling 2.86% to $81.24 a barrel, as coronavirus protests in top importer China fueled demand concerns.
Copper and other metals also fell into the protests.
European stock futures fell in both major markets while S&P 500 futures fell 0.77%.
Bigger concerns about China’s coronavirus policies dampened any support for investor sentiment from the central bank’s 25 basis point cut to the Reserve Requirement Ratio (RRR) announced on Friday, which would provide about $70 billion in liquidity to prop up the ailing economy.
China reported a fifth consecutive day of record new domestic cases, with 40,052 on Monday.
In Shanghai, demonstrators and police clashed Sunday night as protests against the country’s strict coronavirus restrictions raged for a third day.
There have also been protests in Wuhan, Chengdu and parts of the capital, Beijing, where coronavirus restrictions have been imposed in an effort to quell the outbreak of the new disease.
There is a risk that China’s plan to coexist with COVID is too slow, said Robert Subaraman, former chief Japanese economist for the Nomura region in Asia, as rising COVID cases lead to more protests and social unrest weakens the economy.
“Things are very fluid,” he said. “The protests could also be the catalyst that leads to a positive outcome in leading the government to develop a clearer game plan for how the country can learn to live with COVID, establish a more transparent timeline, and accelerate China’s move to live with COVID.”
The dollar extended its gains against the yuan, up 0.57%, but surpassed its previous session highs.
The COVID rules and resulting protests are creating fears that the economic hit to China will be greater than initially anticipated.
“Even if China is on a path to eventually moving away from its approach to not spreading the coronavirus, the low level of vaccination among the elderly means that exit is likely to be slow and possibly unregulated,” CBA analysts said Monday. “The economic effects are unlikely to be small.”
The benchmark 10-year Treasury note yielded 3.6314% from its US close of 3.702% on Friday. The two-year yield, which measures traders’ expectations for the federal funds rate, touched 4.4278%, compared to the US closing of 4.479%.
The dollar fell 0.46% against the yen, to 138.46, after initially trading higher earlier in the day. It is still far from this year’s high of 151.94 on Oct. 21.
The euro fell 0.4%, after rising 4.94% in one month, while the dollar index, which measures the greenback against a basket of other major trading partner currencies, rose to 106.39.
Gold was a little lower. Spot gold was trading at $1,749.54 an ounce.
Additional reporting by Scott Murdoch in Sydney; Editing by Sam Holmes
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