Traders are fearful Chinese authorities will revert to highly restrictive Covid containment measures
European and US stocks rose and oil prices recovered from heavy losses on Tuesday despite fresh concern that China’s latest Covid-19 outbreaks could herald a global recession.
London, Paris and Frankfurt closed in the green while Wall Street was also up even as worries grew over the economic fallout of Beijing’s efforts to contain rising infections in the world’s second-largest economy.
“China remains entirely polarising,” noted Stephen Innes of SPI Asset Management.
“Some investors are convinced that China’s reopening is a formality and will be catalysed by the WHO downgrading Covid to an endemic. We know China’s reopening will be laced with fits and starts,” he added.
“You cannot rule out more intermittent lockdowns in the near term, but in a more targeted way instead of widespread.”
Traders are fearful that Chinese authorities will revert to highly restrictive Covid containment measures that have already dealt a chilling blow to its economy this year.
“Renewed crackdowns in the world’s second largest economy raise the prospect of a global recession,” City Index analyst Fiona Cincotta told AFP.
Craig Erlam, senior market analyst at OANDA trading platform, cautioned that this week “may just be a void in an otherwise turbulent year” thanks to a lack of major events and the US Thanksgiving public holiday.
World oil prices also clawed back ground, having tumbled on Monday to lows unseen since January on forecasts of a hit to Chinese demand, although analysts warned the recovery could be constrained.
“The upside potential is being limited by a general sense of uncertainty brought by China’s unclear demand prospects while also being impacted by the ongoing Russia-Ukraine conflict,” said Walid Koudmani, chief market analyst at XTB.
Erlam added that the rejection by OPEC+ members of reports they would boost oil production aided the commodity’s rally.
The dollar slid against main rivals ahead of minutes from the Federal Reserve’s latest policy meeting that saw it carry out another big hike to US interest rates.
Hopes that the central bank will begin to take its foot off the pedal were boosted earlier this month by figures showing US inflation slowed more than expected, suggesting a series of hikes were beginning to bite.
– ‘Serious headwinds’ –
The OECD forecast Tuesday that world economic growth will slow sharply from 3.1 percent this year to 2.2 percent next year on high inflation.
And it warned of “serious headwinds” including rising interest rates, surging energy prices and Russia’s war on Ukraine.
Global stock markets began November with a rally on easing inflation concerns and signs China was edging towards a looser approach to the disease.
However, the optimism has been given a massive jolt since the country announced its first virus deaths in six months.
Case numbers have surged across China, just a week after it said it would begin rolling back some of the strict Covid rules that have been in place since the pandemic started in 2020.
– Key figures around 1630 GMT –
London – FTSE 100: UP 1.0 percent at 7,452.84 points (close)
Paris – CAC 40: UP 0.4 percent at 6,657.53 (close)
Frankfurt – DAX: UP 0.3 percent at 14,422.35 (close)
EURO STOXX 50: UP 0.5 percent at 3,929.90
New York – Dow: UP 0.8 percent at 33,959.30
Tokyo – Nikkei 225: UP 0.6 percent at 28,115.74 (close)
Hong Kong – Hang Seng Index: DOWN 1.3 percent at 17,424.41 (close)
Shanghai – Composite: UP 0.1 percent at 3,088.94 (close)
Euro/dollar: UP at $1.0271 from $1.0242 on Monday
Dollar/yen: DOWN at 141.43 yen from 142.14 yen
Pound/dollar: UP at $1.1865 from $1.1823
Euro/pound: DOWN at 86.55 pence from 86.63 pence
Brent North Sea crude: UP 1.5 percent at $88.80 per barrel
West Texas Intermediate: UP 1.5 percent at $81.22 per barrel
