Hopes for the reopening of China's economy are being offset by concerns about a US recession
Hong Kong soared but other stock markets mostly fell Thursday as investors weighed worries about a US recession against China’s shift away from strict Covid restrictions.
Oil prices rebounded slightly from recent sharp losses.
“The risk-off sentiment… remains hard to kick into touch as concerns about recession stay front and centre,” noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“The evil twins of recession and persistently higher inflation are lurking, keeping investors on edge.”
Analysts pointed out that two-year US Treasury yields were much higher than those of 10-year bonds, which is usually considered a clear indication of a looming recession.
This week also saw the heads of some of Wall Street’s biggest banks warn of a downturn.
Traders are now steeling themselves for the release next week of crucial inflation figures and the Fed’s final policy meeting of the year, which will be pored over for an idea about its intentions in 2023.
The fear of a US recession is playing off against China’s shift away from its zero-Covid strategy of lockdowns and mass testing that has been blamed for clattering the world’s number two economy.
After widespread protests last month against the strict measures and calls for more political freedoms, authorities have scaled back many of them and on Wednesday announced a nationwide loosening of restrictions.
While there are worries that the more liberal approach will spark a surge in infections, it has helped fan a rally across markets, particularly in Hong Kong where Chinese tech firms and property developers are listed.
The Hang Seng Index closed up more than three percent Thursday.
“Developments in China have a big role to play, although as we’re seeing once again, Covid-related moves are almost exclusively impacting stocks in domestic markets,” said Craig Erlam, senior analyst at OANDA trading group.
“We can see that again overnight, with reports of looser mask and isolation requirements in Hong Kong lifting the Hang Seng and making it the clear outperformer in the region, while most other indices tread water.”
– Key figures around 1200 GMT –
London – FTSE 100: FLAT at 7,488.65 points
Frankfurt – DAX: DOWN 0.3 percent at 14,217.20
Paris – CAC 40: DOWN 0.1 percent at 6,650.95
EURO STOXX 50: DOWN 0.2 percent at 3,912.11
Tokyo – Nikkei 225: DOWN 0.4 percent at 27,574.43 (close)
Hong Kong – Hang Seng Index: UP 3.4 percent at 19,450.23 (close)
Shanghai – Composite: DOWN 0.1 percent at 3,197.35 (close)
New York – Dow: FLAT at 33,597.92 (close)
Euro/dollar: UP at $1.0512 from $1.0510 on Wednesday
Dollar/yen: UP at 136.77 yen from 136.57 yen
Pound/dollar: DOWN at $1.2176 from $1.2209
Euro/pound: UP at 86.34 pence from 86.05 pence
Brent North Sea crude: UP 1.0 percent at $77.95 per barrel
West Texas Intermediate: UP 1.0 percent at $72.76 per barrel
