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Global stocks slip after zero-covid protests in China

Global stocks slip after zero-covid protests in China
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Global stocks fell on Monday after protests in China against the government’s Covid-19 policies dragged down sentiment and added uncertainty about the outlook for the world’s second-largest economy.

Wall Street’s benchmark S&P 500 lost 0.9 percent, chipping away at the index’s more than 3 percent gain last month. The tech-heavy Nasdaq Composite fell 0.8 percent. Europe’s regional Stoxx 600 fell 0.6 percent and London’s FTSE 100 fell 0.2 percent.

Oil prices were steady in late afternoon in London, with international benchmark Brent crude, down nearly 3 percent earlier in the day. US benchmark West Texas Intermediate added 0.7 percent, erasing a 1.8 percent decline.

In Hong Kong, the Hang Seng China Enterprises Index fell as much as 4.5 percent before retreating to 1.6 percent. The CSI 300 index of China’s Shanghai- and Shenzhen-listed shares fell as much as 2.8 percent before trimming more than 1 percent.

Protests spread Beijing, Shanghai and other cities over the weekend against government-imposed pandemic restrictions. Discontent has intensified since a fire last week killed 10 people in the city of Urumqi, sparking vigils across China as authorities denied allegations that coronavirus restrictions had hampered rescue efforts and prevented residents from escaping the blaze.

Growing volatility in China has hit investors with a “reality check”, said Emmanuel Kau, head of European equity strategy at Barclays.

“Hopes for China to reopen were part of the year-end bullish narrative,” Kou added. “Investors now understand that whatever the direction of travel to zero-Covid, it will not be a smooth process.”

Traders said the protests added to uncertainty about China as a surge in coronavirus infections increased pressure on local officials to enforce President Xi Jinping’s strictures. Zero-Covid policy.

“Investor confidence has already suffered this year, and it is difficult to understand what direction the market will take next,” said Louis Tse, managing director of Hong Kong-based brokerage Wealthy Securities.

Tse said investors were concerned about a lack of additional support for China’s economy as infections rose to a record, slowing a rally that pushed the Hang Seng China Enterprises Index up more than 17 percent this month.

The use of blank paper as a symbol of protest against censorship has caused problems for some listed Chinese companies. Shanghai-listed shares of paper supplier Shanghai M&G Stationery fell as much as 3.1 percent on Monday. It clarified in an exchange filing that a statement circulating on social media, which claimed that the company had stopped selling A4 paper “to protect national security”, was a hoax.

A gloomy outlook for China’s economy weighs on the renminbi. The Chinese currency fell 1.1 percent to Rmb7.24 against the dollar.

The U.S. dollar index traded 0.3 percent higher against a basket of six international peers, benefiting somewhat from a “flare-up in China risk,” said Lee Hardman, a currency analyst at MUFG.

Martin Petch, vice-president of Moody’s Investors Service, said the protests “have the potential to be credit negative if they persist and trigger a stronger response by the authorities”.

“While this is not our base case,” he added, “it will lead to an increased level of uncertainty about the level of political risk in China, spill over into damaged confidence and therefore costs to an already weak economy.”

Japan’s benchmark TOPICS was down 0.7 percent, while South Korea’s Kospi fell 1.2 percent.

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