Home / Business / Shanghai lockdown fears drag markets, oil prices

Shanghai lockdown fears drag markets, oil prices

STORMY DAYS AHEAD? Lightning strikes during a thunderstorm over Shanghai on Monday, July 11, 2022. AFP PHOTOSTORMY DAYS AHEAD? Lightning strikes during a thunderstorm over Shanghai on Monday, July 11, 2022. AFP PHOTO 

HONG KONG: Asian markets and oil prices fell on Monday after a fresh Covid flare-up in Shanghai fanned fears of another economically painful lockdown in China’s biggest city.

The news came after a forecast-busting United States jobs report last week indicated the world’s top economy was coping so far with the Federal Reserve (Fed) interest rate hikes, giving it room for more as it battles soaring inflation.

Traders are also keeping tabs on developments in Washington as US President Joe Biden weighs removing some of the tariffs on Chinese goods imposed by his predecessor Donald Trump that are worth hundreds of billions of dollars.

Shanghai recorded more than 120 coronavirus cases over the weekend, having seen its first case of the highly contagious BA.5 Omicron strain, forcing officials to launch another mass testing drive.

With China fixated on its zero-Covid strategy of wiping out the disease, there is increasing concern that authorities would revert to another wide lockdown, with Shanghai residents having only emerged from a two-month confinement in June.

There have also been new infections uncovered in other parts of the country, including Beijing.

Data this week will provide a fresh update on the economic impact of those measures, as well as similar strict controls in Beijing.

The prospect of another lockdown sparked a selloff in Hong Kong and Shanghai, with Chinese technology firms also taking a battering after authorities fined giant Tencent and Alibaba for not properly reporting past deals.

Hong Kong-listed casino operators were also sharply lower after gambling hub Macau began a weeklong lockdown to curb its worst coronavirus outbreak.

There were also losses in Sydney, Seoul, Taipei, Manila, Mumbai, Jakarta and Wellington.

However, Tokyo rose as traders welcomed Japan’s ruling bloc securing a strong win in Sunday’s parliamentary election, held days after the assassination of former premier Shinzo Abe.

The result is seen to provide the government with some stability, while hopes for a Cabinet reshuffle and economic stimulus are raised.

London, Paris and Frankfurt were all sharply lower in morning trade.

The weak start to the week followed a tepid lead from Wall Street, where the strong jobs reading ramped up bets on further big Fed rate hikes after officials said the economy was strong enough to withstand them.

“The resilience of the US labor market, with the unemployment rate at 3.6 percent, as well as jobs markets elsewhere, helps to offer a compelling narrative to those who think recession concerns are overblown,” CMC Markets analyst Michael Hewson said.

The US central bank is predicted to announce a second successive 0.75-percentage-point lift at its next meeting this month while further big increases are also expected before the end of the year.

Fed policymakers have said they are determined to bring inflation down from four-decade highs, even if that means hurting growth.

Worries about another shock to the Chinese economy from possible shutdowns also dented oil markets as concerns about a hit to demand outweighed ongoing concerns about tight supplies.

Still, there is a view that prices will remain elevated for now.

“Covid numbers are ticking up again,” SPI Asset Management’s Stephen Innes said.

“Although the possible demand impact of a recession continues to weigh on sentiment, the prevailing view, at least for now, is that the longer-term structural issues facing the oil market will support prices,” he added.

Investors will keep watch on Biden’s visit this week to Saudi Arabia, where he is expected to push for the crude giant to ramp up production to make up for the output lost to sanctions imposed on Russia over its invasion of Ukraine.

*****
Credit belongs to : www.manilatimes.net

Check Also

Aboitiz Data partners with logistics solutions provider

Aboitiz Data Innovation (ADI) and local software developer Shiptek Solutions Corporation (Shiptek) recently forged a …