Global stocks brush off China protest concerns

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Global stocks rebounded on Tuesday following a sharp fall, after protests in China against the government’s strict zero-Covid policies spooked investors and added to uncertainty about the outlook for the world’s second-biggest economy.

Hong Kong’s Hang Seng index soared 5.2 per cent following a 1.6 per cent slump in the previous session, while China’s CSI 300 added 3.1 per cent.

The moves came despite the imposition of a fresh round of business closures and quarantines of close coronavirus contacts in Shanghai, and as the country reels from widespread demonstrations against President Xi Jinping’s stringent lockdown measures.

Europe’s regional Stoxx 600 added 0.3 per cent in early trading having lost 0.6 per cent on Monday, while London’s FTSE 100 rose 0.6 per cent. Contracts tracking Wall Street’s benchmark S&P 500 gained 0.4 per cent while those tracking the tech-heavy Nasdaq 100 traded 0.6 per cent higher.

US equities have rallied this month but sold off on Monday on what Neal Shearing, chief economist at Capital Economics, described as a “risk-off” session for investors.

The protests in China created “enormous” uncertainties about the speed at which the country might reopen next year, Hudson added, with any relaxation of zero-Covid policies likely to lead to a further surge in cases and a hit to the supply side of China’s economy.

Investors were also alert to hawkish comments from John Williams, president of the Federal Reserve Bank of New York, who warned on Monday that US unemployment could rise from its current level of 3.7 per cent to between 4.5 per cent and 5 per cent by the end of next year.

The Fed funds futures market now assigns a 63 per cent probability to the central bank raising rates by 0.5 percentage points in December — potentially ending a run of four consecutive 0.75 percentage-point increases — but Williams stressed that officials had plenty of work to do in their battle to bring inflation back down to 2 per cent.

“Inflation is far too high, and persistently high inflation undermines the ability of our economy to perform at its full potential,” he said in a statement. Those concerns were echoed by James Bullard, president of the St Louis branch of the Federal Reserve, who said on Monday that the central bank’s aggressive monetary tightening was not yet finished.

Even so, the decline in US stocks on Monday was “a slow and steady ride”, said Mike Zigmont, head of trading and research at Harvest Volatility Management.

“The absence of emotion in [the] sell-off suggests that it was partially expected and doesn’t change the sentiment of the market,” Zigmont added. “There was no sharp drop to scare investors off their bids.”

Oil prices, meanwhile, rose on Tuesday, with international benchmark Brent crude oil up 2 per cent at $84.84 a barrel, after declining 0.5 per cent in the previous session.

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