Fears of Beijing incarceration brought down world stocks on Monday, already weighed down by monetary tightening in the United States, a cocktail that could threaten economic growth. Chinese stocks fell: Shanghai lost 5.13%, Shenzhen 6.48% and Hong Kong 3.73%. Europe followed the same trend: Paris fell 2.10% and London 1.99%, weighed down by luxury and mining respectively. Frankfurt lost 1.46% and Milan 1.48% around 13:35.
Wall Street would also fall, according to the futures contracts of the three major indices, which lost about 0.70%. Markets worry that new coronavirus cases reported in Beijing will force Chinese authorities into strict lockdowns in the capital, as is already happening in Shanghai, and disrupt supply chains. “The fear that (the policy of) zero covid will torpedo Chinese growth” is mounting, Jeffrey Halley, an analyst at Oanda, is concerned. Taking advantage of its safe-haven status, the US dollar appreciated against several major currencies, including the euro (+0.60%) and the pound (+0.80%).
Also read: China’s stock markets are spinning in light of the return of lockdowns
Raw materials fall short
These fears spilled over into the oil and metals markets, where prices fell on the prospect of sluggish demand in China, the world’s largest importer of commodities. The North Sea Brent barrel for delivery in June fell 4.17% to $102.20. A barrel of American West Texas Intermediate (WTI) for delivery the same month also yielded 4.11% to $97.88. The oil companies followed suit, such as BP (-4.44%), Shell (-3.68%), or TotalEnergies (-3.14%).
On the London Metal Exchange, copper was yielding 2.26% and aluminum 4.48%, at $3,100 a tonne, a level not seen since Russia’s invasion of Ukraine. Mining stocks were also hit: Anglo American fell 7.37%, Glencore 6.93%, Rio Tinto 5.44%, ArcelorMittal 7.28%. In addition to these economic disruptions, there is a risk of monetary tightening that is stricter and faster than previously expected by investors, which is likely to hurt US growth.
Faced with inflation, Fed chairman Jerome Powell said on Thursday that a half-percentage point hike in key rates was “on the table” for the next monetary meeting in early May. These comments “underline the gigantic linchpin the Fed has created in just a few weeks,” said Markets.com analyst Neil Wilson. He does not consider an interest rate increase of 75 basis points ‘not really plausible’, unlike other financial players.
Also read: The Fed raises interest rates and plans more hikes
Luxury takes a hit
The re-election of French President Emmanuel Macron left markets indifferent. He “is the candidate for continuity/stability, so the market is not reacting to his expected victory,” said Neil Wilson. In Sri Lanka, which is experiencing its worst economic crisis since independence, the Colombo Stock Exchange closed again on Monday after plunge of 12.6% for its first session after two weeks of closure.
Fear of activity in China does not bode well for the luxury sector, which is highly dependent on this market. Hong Kong-listed Prada fell 5.05%. In Europe, LVMH fell 3.56%, Kering 4.18%, Burberry 4.56%, Moncler 3.70% and Richemont 5.55%.
Twitter considers Musk’s proposal
Twitter is reviewing Elon Musk’s purchase proposal again, and talks took place between the two camps on Sunday after the Tesla boss said on Thursday he had secured the amount needed for the transaction, the Wall Street Journal reported. Twitter action cost more than 5.7% in e-commerce ahead of Wall Street’s opening.
Also read: Twitter reconsiders proposal to buy Elon Musk
Swiss pharmaceutical giant Roche reported better-than-expected sales for the first quarter, driven by a rebound in its pharmaceutical business and continued strong sales of Covid-19 tests. But its action lost 2.26%, due to a slight disappointment in its pharmaceutical division. Earnings season continues this week with many US tech companies coming out on Tuesday and Thursday.