China is the last major economy wedded to a strategy of extinguishing Covid-19 outbreaks as they emerge
Most Asian markets started the week with gains Monday following strong US jobs data, although stocks in Shanghai were flat after China said it would stick to its strict zero-Covid policy.
Global stock markets and oil prices rallied last week on hopes that Beijing would roll back some of its economically painful policies aimed at stamping out the disease within its borders.
But on Saturday, the Chinese government said it would “unswervingly” stick to its current plan, which involves harsh lockdowns and strict quarantine and testing regimens for even the smallest clusters of cases.
Wall Street equities had enjoyed a boost on Friday from the latest US jobs data, which showed that hiring remained resilient and wages continued to rise, though at a slower pace.
The data, which comes days ahead of critical US midterm elections, raised hopes of a soft landing for the world’s biggest economy despite aggressive Fed rate hikes aimed at taming inflation.
All three main US indexes ended around 1.3 percent higher on Friday, and Tokyo shares extended those gains on Monday to end the morning session 1.2 percent up.
Hong Kong shares dipped slightly at the open but quickly recovered to add 1.4 percent — adding to a jump of more than five percent in the previous session.
Bourses in Shanghai and Shenzhen were barely changed in morning trade, however.
“Last week, the financial market was stirring on rumours of China reopening,” Raymond Yeung and Zhaopeng Xing of ANZ Research said in a note on Monday.
But as the rumours about a reopening were unsubstantiated, “it is more likely the market is over-interpreting new information and downplaying old developments”, they wrote.
“Obviously, China feels the urgency to normalise the economy… But the political leadership will not adopt ‘living with Covid’,” the pair added.
“In our view, the availability of locally developed new vaccines will be a game changer”.
China is the last major economy wedded to a strategy of extinguishing Covid-19 outbreaks as they emerge.
It is still imposing snap lockdowns, mass testing and lengthy quarantines — despite the widespread disruption to businesses and international supply chains.
Seoul rose 0.8 percent, Taipei was up 1.1 percent and Sydney was up 0.5 percent in early trade on Monday. Singapore was flat and Jakarta dipped 0.3 percent.
Dashed hopes of a Chinese reopening also drove down oil prices, which had rallied on Friday on the optimism that Beijing could soon change course, pushing up demand for crude.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.2 percent at 27,528.66 (break)
Hong Kong – Hang Seng Index: UP 1.4 percent at 16,393.36
Shanghai – Composite: DOWN 0.1 percent at 3,068.62
London – FTSE 100: UP 2.0 percent at 7,334.84 (close)
Pound/dollar: DOWN at $1.1325 from $1.1376 Friday
Euro/dollar: DOWN at $0.9933 from $0.9964
Dollar/yen: UP at 147.21 yen from 146.62 yen
Euro/pound: UP at 87.80 pence from 87.56 pence
West Texas Intermediate: DOWN 1.4 percent at $91.28 per barrel
Brent North Sea crude: DOWN 1.2 percent at $97.43 per barrel
New York – Dow: UP 1.3 percent at 32,403.22 (close)
