AFP

Stocks diverged Tuesday after big rallies in Asian markets failed to trigger a similar reaction in Europe and on Wall Street as investors remain cautious before key US data and speeches later in the week.

Sentiment was boosted in Asia after China avoided another night of protests, following a weekend of unrest sparked by the tough anti-Covid policy that is weighing on growth in the world’s second biggest economy.

There were big rallies in Hong Kong and Shanghai, with property firms enjoying a much-needed surge, also on moves to ease funding restrictions on troubled developers.

But sentiment was tempered by warnings from top Federal Reserve policymakers that US interest rates would climb further and could go higher than initially thought to fight decades-high inflation.

Europe’s main stock markets were mixed at the end of the day’s trading as all three main indices on Wall Street slid Tuesday.

London closed up 0.5 percent, boosted by HSBC’s announcement Tuesday that it would sell its Canadian division to Royal Bank of Canada for US$10.1 billion, which led to the bank’s share price rising over four percent.

German inflation also unexpectedly slowed in November to 10 percent from a record high of 10.4 percent in October, preliminary data showed Tuesday.

Economists however cautioned against assuming inflation was now on a downhill path as households will likely face higher energy costs from January.

US consumers appeared equally gloomy about the state of the American economy after a closely watched consumer confidence index dipped to 100.2 in November, down two points from the month before, data showed Tuesday.

“Investors will need to be made of stern stuff going into the new year,” Danni Hewson, AJ Bell financial analyst, said in a note.

“Volatility has been a hallmark of 2022 and the word looks set to remain an analyst favourite into the New Year and beyond.”

– Looking to the Fed –

Market focus is turning to the United States, with a number of Fed officials due to speak, including boss Jerome Powell.

Noting that there has not been “any carryover momentum from the Chinese markets” on Wall Street Tuesday, Patrick J. O’Hare of Briefing.com said it “suggests… market participants are more attuned for the time being to happenings closer to home” including Powell’s speech Wednesday.

“Sure, the latest developments have helped temper some of yesterday’s selling activity, but they have not ignited buying efforts,” he said.

Friday sees the release of key US jobs data, which could provide an idea about the central bank’s plans for monetary policy.

Bets on a slowdown in its pace of rate hikes have boosted markets for the past weeks, but some high-ranking members on Monday looked to play down the chances of a more dovish pivot.

– Key figures around 1700 GMT –

New York – Dow: DOWN 0.3 percent at 33,733.05

EURO STOXX 50: FLAT at 3,934.44

London – FTSE 100: UP 0.5 percent at 7,512.00 (close)

Frankfurt – DAX: DOWN 0.2 percent at 14,355.45 (close)

Paris – CAC 40: FLAT at 6,668.97 (close)

Tokyo – Nikkei 225: DOWN 0.6 percent at 28,027.84 (close)

Hong Kong – Hang Seng Index: UP 5.2 percent at 18,204.68 (close)

Shanghai – Composite: UP 2.3 percent at 3,149.75 (close)

Brent North Sea crude: UP 0.8 percent at $83.87 per barrel

West Texas Intermediate: UP 1.4 percent at $78.34 per barrel

Euro/dollar: DOWN at $1.0345 from $1.0347 on Monday

Dollar/yen: DOWN at 138.45 yen from 138.87 yen

Pound/dollar: UP at $1.1980 from $1.1952

Euro/pound: DOWN at 86.33 pence from 86.50 pence

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Britain on Tuesday removed China General Nuclear from construction of its new Sizewell C power station, announcing it would take a joint stake alongside French partner EDF as relations sour with Beijing.

The CGN announcement came after Prime Minister Rishi Sunak warned the “golden era” of UK-China links was “over” and said the Asian giant posed a “systemic challenge” to UK interests and values.

Tuesday’s news comes also with a diplomatic storm brewing over the arrest and alleged assault of a BBC journalist covering widespread protests against Covid restrictions in a rare defiance of the Chinese authorities.

Sunak’s Conservative government is stripping CGN of its controversial 20-percent Sizewell stake, and forming a joint venture with EDF.

The UK will invest £700 million ($843 million) in the project, a figure that was matched by EDF.

Sizewell C, which is under development on the Suffolk coast in eastern England, will comprise two EPRs or European Pressurized Reactors that will power the equivalent of about six million homes. 

It is expected to start producing electricity from 2035.

– ‘Energy sovereignty’ –

Nuclear and renewables, such as offshore wind, are seen as critical to ramp up Britain’s energy security, after key producer Russia’s invasion of Ukraine sent gas and electricity bills rocketing across Europe.

EDF, which is in the process of being fully nationalised amid the region’s worsening energy crisis, confirmed Tuesday it is still working with CGN to build Hinkley Point power station in southwestern England.

Hinkley, which has been blighted by delays and soaring costs, will be Britain’s first new nuclear power plant in more than two decades and aims to provide seven percent of UK power needs.

Tuesday’s news nevertheless further curbs UK ties with the world’s second biggest economy.

London last month ordered a Chinese-owned company to divest most of Britain’s biggest semiconductor maker — a leading industrial asset — after a national security probe. 

And in 2020, Chinese telecoms giant Huawei was banned from involvement in the roll-out of the country’s superfast 5G broadband network, after US concerns about spying.

The UK’s “stake in Sizewell C is positioned at the heart of the new blueprint to Britain’s energy sovereignty”, the Department for Business, Energy and Industrial Strategy (BEIS) said in a statement.

The move “also allows for China General Nuclear’s exit from the project, including buy-out costs, any tax due and commercial arrangements”, it added. 

The UK says Sizewell will deliver cleaner energy than fossil fuels and create 10,000 jobs for the local area and national economy.

Greenpeace UK policy director Doug Parr, however, slammed the nuclear push.

“Several academic institutes have shown we can have a 100-percent renewable system that would be cheaper than those based on nuclear or fossil fuels,” said Parr.

“And it has the added benefit of not creating millennia of worry over the nuclear waste that future generations will end up dealing with.”

Local campaign group Stop Sizewell C added that the project “can neither lower energy bills nor give the UK energy independence” and would cost “a huge amount of money”.

– UK support ‘essential’ –

The news meanwhile comes as some of EDF’s EPR nuclear reactors have been dogged by maintenance issues and delays.

“The support of the UK government through its direct participation… is essential” to Sizewell, EDF Energy chief executive Simone Rossi told AFP in an interview.

“This decision is a sign of confidence in the nuclear industry — and in the French nuclear industry.”

Business and Energy Secretary Grant Shapps said Sizewell would move Britain “towards greater energy independence and away from the risks that a reliance on volatile global energy markets for our supply comes with”.

The UK has 15 nuclear reactors at eight sites but many are approaching the end of their lifespan.

Sizewell comprises two power plants: Sizewell A, which opened in the 1960s and shut in 2006. Sizewell B, which opened in 1995, is still in operation.

Britain is turning to new plants also to help meet its long-running target of net zero carbon emissions by 2050.

The government added on Tuesday it would create Great British Nuclear, a body overseeing development of more projects.

Sunak’s administration is meanwhile partially subsidising household energy bills — which have pushed UK inflation to a 41-year peak — to cushion a cost-of-living crisis.

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French President Emmanuel Macron is making an eye-catching drive to strengthen partnerships with Central Asian states, seeking to boost Europe’s influence in a strategic region where China, Russia, Turkey and the United States are already jostling for supremacy.

Macron held talks in Paris earlier this month with Uzbekistan President Shavkat Mirziyoyev, who was making a rare visit to a Western capital, and on Tuesday hosted Kazakh President Kassym-Jomart Tokayev at the Elysee Palace.

Last year, Macron hosted Tajik President Emomali Rahmon in Paris in an extremely unusual visit and also held telephone talks with the leader of Tajikistan on Saturday.

The flurry of diplomacy between Paris and the key Central Asian capitals come as France reassesses its ties with the former Soviet region in the wake of Russia’s invasion of Ukraine.

Macron had previously sought to cultivate a viable relationship with Russian President Vladimir Putin.

Astana, Dushanbe and Tashkent have taken an at best ambivalent stance on the invasion. They have shown no enthusiasm but have stopped short of full-throated condemnation that would irritate their ex-Soviet masters in Moscow.

Their ties with Russia are also of interest to Paris, which is keeping an eye on a possible negotiated solution to the invasion of Ukraine. 

Tokayev held talks in Moscow with Putin the day before travelling to Paris.

Tokayev’s visit aims to “consolidate our relationship and expand our dialogue in a context that is also difficult for the countries of Central Asia”, said a French presidential official who asked not to be named.

“We continue to … show our Central Asian partners the importance we attach to their region, wedged between China and Russia, and which needs to open up new horizons,” added the official.

– ‘Lacking competitiveness’ –

A Kazakh government source told AFP: “We firmly support the territorial integrity of Ukraine” in the face of the invasion.

“We don’t support sanctions as a matter of principle. But we are not allowing our territories to be used for evading sanctions,” the source added.

Meanwhile the Russian-led Collective Security Treaty Organisation (CSTO), a regional military alliance of which Kazakhstan is a member, is also in crisis. 

A CSTO summit in Armenia earlier this month collapsed in near acrimony.

Cultivating such ties means Paris is also hosting leaders who are under fire for rights violations at home.

Tokayev comes to Paris fresh from an election in which he won a second term with a crushing 81.3 percent. 

The Organisation for Security and Cooperation in Europe said the vote “took place in a political environment lacking competitiveness”.

Around 230 people were killed when Tokayev violently suppressed protests in January over living costs.

Mirziyoyev is meanwhile credited with opening up Uzbekistan after the death of its post-Soviet leader Islam Karimov.

He has pushed through significant economic and social reforms but his regime is accused by aid organisations of trampling on people’s basic rights.

– Diversify partnerships –

In a typical French touch, the visits by Rahmon and Mirziyoyev have both been accompanied by blockbuster exhibitions of cultural treasures rarely seen outside Tajikistan and Uzbekistan.

While China and the US have vied with Russia for influence in the region since the fall of the USSR, Turkey has in recent years shown an awakened interest in nations with which it shares close cultural and linguistic ties.

Ankara has revived a body known now as the Organisation of Turkic States and President Recep Tayyip Erdogan, with whom Macron has a tense relationship, has been a regular visitor to the region.

Analysts say that in the short term Europe is keen to promote energy ties with Central Asia, especially with hydrocarbon-rich Kazakhstan, as supplies from Russia dwindle. It also values the region’s role as a key pipeline hub.

“What interests the Europeans in Central Asia are energy resources while Russian hydrocarbons are under embargo … and the transport corridors between China and the European Union,” said Michael Levystone, associate researcher at the IFRI think tank. 

“(Meanwhile) the sanctions against the Russian economy encourage the countries of Central Asia to diversify their partnerships on the international scene,” added Levystone, whose Paris-based organisation specialised in Central Asia.

The Kazakh source said: “In light of the current uncertainties regarding energy security in Europe, Kazakhstan is determined to continue to play a role as a reliable and trustworthy energy partner.”

Stocks and oil prices rebounded strongly Tuesday, while the haven dollar weakened, on speculation that China would further ease strict Covid measures but investors remain cautious ahead of key US data and speeches later in the week.

Sentiment was boosted also after China avoided another night of protests, following a weekend of unrest sparked by the tough anti-Covid policy that is weighing on growth in the world’s second biggest economy.

Stock market gains were led by big rallies in Hong Kong and Shanghai, with property firms enjoying a much-needed surge, also on moves to ease funding restrictions on troubled developers.

Europe’s main stock markets were mainly higher in late afternoon trading.

But sentiment was tempered by warnings from top Federal Reserve policymakers that US interest rates would climb further and could go higher than initially thought to fight decades-high inflation.

US stocks edged lower early Tuesday ahead of key releases on consumer health before the festive shopping season kicks off.

“Risk-on sentiment has lifted European equities, boosted by a rally overnight in China,” noted Victoria Scholar, head of investment at Interactive Investor.

Oil prices rebounded from 11-month lows, “boosted by improved sentiment towards demand from China”, she added.

Qatar announced Tuesday its first major deal to send liquefied natural gas to Germany as Europe scrambles to find alternatives to Russian energy sources.

Qatar’s Energy Minister Saad Sherida al-Kaabi said up to two million tons of gas a year would be sent for at least 15 years from 2026, and that state-run QatarEnergy was discussing other possible deals for Europe’s biggest economy.

German inflation also unexpectedly slowed in November to 10 percent from a record high of 10.4 percent in October, preliminary data showed Tuesday.

Economists however cautioned against assuming inflation was now on a downhill path as households will likely face higher energy costs from January.

Market focus was meanwhile turning to the United States, with a number of Fed officials due to speak, including boss Jerome Powell.

Noting that there has not been “any carryover momentum from the Chinese markets” on Wall Street Tuesday, Patrick J. O’Hare of Briefing.com said it “suggests to us that market participants are more attuned for the time being to happenings closer to home” including Powell’s speech Wednesday.

“Sure, the latest developments have helped temper some of yesterday’s selling activity, but they have not ignited buying efforts,” he added.

Friday sees the release of key US jobs data, which could provide an idea about the central bank’s plans for monetary policy.

Bets on a slowdown in its pace of rate hikes have boosted markets for the past weeks, but some high-ranking members on Monday looked to play down the chances of a more dovish pivot.

– Key figures around 1445 GMT –

London – FTSE 100: UP 0.6 percent at 7,522.52 points

Frankfurt – DAX: DOWN 0.1 percent at 14,361.21

Paris – CAC 40: UP 0.2 percent at 6,678.44

EURO STOXX 50: FLAT at 3,937.97

New York – Dow: DOWN 0.1 percent at 33,801.67

Tokyo – Nikkei 225: DOWN 0.6 percent at 28,027.84 (close)

Hong Kong – Hang Seng Index: UP 5.2 percent at 18,204.68 (close)

Shanghai – Composite: UP 2.3 percent at 3,149.75 (close)

Brent North Sea crude: UP 2.7 percent at $85.48 per barrel

West Texas Intermediate: UP 2.4 percent at $79.07 per barrel

Euro/dollar: DOWN at $1.0344 from $1.0347 on Monday

Dollar/yen: DOWN at 138.70 yen from 138.87 yen

Pound/dollar: UP at $1.1968 from $1.1952

Euro/pound: DOWN at 86.44 pence from 86.50 pence

China’s top security body called for a “crackdown” against “hostile forces” on Tuesday, after a weekend of protests in major cities opposing Covid lockdowns and demanding greater political freedoms.

The stark warning came after security services were out in force across China following demonstrations not seen in decades, as anger over unrelenting lockdowns fuelled deep-rooted frustration with the political system.

A deadly fire last week in Urumqi, the capital of the northwestern region of Xinjiang, was the catalyst for the outrage, with protesters taking to the streets in cities around China. 

The demonstrators said Covid-19 restrictions were to blame for hampering rescue efforts in Urumqi, claims the government swiftly denied.

China is the world’s last major economy still wedded to a zero-Covid policy, which compels local governments to impose snap lockdowns and quarantine orders, and limit freedom of movement in response to minor outbreaks.

Anger over the lockdowns has widened to calls for political change, with protesters holding up blank sheets of paper to symbolise the pervasive censorship to which the world’s most populous country is subjected.

On Tuesday, the ruling Communist Party’s Central Political and Legal Affairs Commission called for a “crackdown” on what it described as “hostile forces” — a possible warning to the protesters, which the readout published in state news agency Xinhua did not mention directly.

The body —  which oversees all domestic law enforcement in China — also agreed at its meeting that it was time to “crack down on illegal criminal acts that disrupt social order” as well as “safeguard overall social stability.”

The warning came after a heavy police presence across cities on Monday and Tuesday appeared to have quelled protests for the time being.

In another sign of the government’s zero-tolerance of dissent, people who had attended weekend rallies in the Chinese capital told AFP on Monday they had received phone calls from law enforcement officers demanding information about their movements.

– ‘Liberty or death’ –

On Tuesday hundreds of officers appeared to have been drawn back from the streets of a rain-drenched Shanghai, where weekend protests had seen bold calls for the resignation of President Xi Jinping, an AFP reporter said.

A broad effort by police to stop passersby taking pictures of the site of the protest also appeared to have been tapered down, the reporter added, with one officer telling AFP that it “depends on the nature of the photo” but that there was no blanket ban in place.

In Beijing, AFP reporters saw a few marked and unmarked police vehicles but no sign of protesters at an intersection near the Asian Games Village, where a demonstration had been planned for Tuesday night. 

Freezing temperatures of minus nine degrees Celsius (15.8 degrees Fahrenheit) likely also kept protesters away.

Some rallies did go ahead elsewhere on Monday and Tuesday, however. 

At Hong Kong’s oldest university, over a dozen people led the crowd Tuesday in chanting slogans such as “give me liberty or give me death”. 

“We are not foreign forces, we are Chinese citizens. China should have different voices,” one woman shouted, while another held a placard mourning victims of the Urumqi fire. 

In Hangzhou, just over 170 kilometres (105 miles) southwest of Shanghai, there was heavy security and sporadic protests in the city’s downtown on Monday night. 

“The atmosphere was disorderly. There were few people and we were separated. There were lots of police, it was chaos,” she said.

– ‘Many died in vain’ –

China’s strict control of information and continued travel curbs have made verifying protester numbers across the vast country challenging.

But the widespread rallies seen over the weekend are exceptionally rare in China, with authorities harshly clamping down on all opposition to the central government.

US President Joe Biden is monitoring the unrest, the White House said Monday.

US Secretary of State Antony Blinken said Tuesday that Washington’s position was “the same everywhere”, and that was to “support the right of people everywhere, to peacefully protest to make known their views, their concerns, and their frustrations”.

Solidarity protests have meanwhile mushroomed around the world.

“Officials are borrowing the pretext of Covid, but using excessively strict lockdowns to control China’s population,” said one 21-year-old Chinese protester in Washington, who gave only his surname, Chen.

“They disregarded human lives and caused many to die in vain,” he told AFP.

– Vaccination drive –

While China’s leaders are committed to zero-Covid, there have been some signs that central authorities may be seeking a path out of the rigid policy.

China’s National Health Commission (NHC) announced on Tuesday a renewed effort to expand low vaccination rates among the elderly — long seen as a key obstacle to relaxing the measures.

Many fear that opening the country up while swaths of the population remain not fully immunised could overwhelm China’s healthcare system and cause more than a million deaths.

Just 65.8 percent of people over 80 are fully vaccinated, NHC officials told a news conference.

China has also not yet approved mRNA vaccines, which are proven to be more effective, for public use.

The NHC also said local efforts “inconsistent with national policies” had caused a “great impact on people’s work and life”, and warned that “those who cause serious consequences will be held accountable in accordance with laws and regulation”.

However, it did not suggest a change in policy was imminent.

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