Global stocks fell sharply on Monday after protests in China against the government’s strict Covid-19 policies prompted investor worry over the outlook for the world’s second-largest economy.
Wall Street’s benchmark S&P 500 index closed 1.5 per cent lower, while the tech-heavy Nasdaq Composite lost 1.6 per cent. These losses, which were the biggest since November 9th, the first session following the US midterm elections in the US, cut into strong gains this month for equities.
The Hang Seng China Enterprises index in Hong Kong dropped as high as 4.5% before regaining its lost 1.6%. The decline on China’s CSI 300 index of Shanghai- and Shenzhen-listed shares was as big as 2.8 per cent before it was trimmed to just over 1 per cent.
Over the weekend, demonstrations broke out in Beijing and Shanghai against government-induced pandemic restrictions. Ten people were killed in a fire at Urumqi last week. There have been protests across China since then. Authorities deny that coronavirus restrictions hampered rescue efforts or prevented residents from fleeing the flames.
The US dollar index traded 0.7 per cent higher against a basket of six international peers, benefiting in part from the “flare-up in China risks”, said Lee Hardman, a currency analyst at MUFG.
Growing unrest in China has hit investors with a “reality check”, said Emmanuel Cau, head of European equity strategy at Barclays.
“China reopening hope was part of the bullish end-of-year narrative,” Cau added. “Investors now realise that whatever the direction of travel is on zero-Covid, it won’t be a smooth process.”
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