New York: US stocks followed a decline in equities around the world and concerns about global economic growth were fueled by rare protests in major cities of China on Monday against the country’s strict zero-tolerance COVID-19 restrictions.
A rise in COVID cases and clashes between police and protesters in several major Chinese cities over the weekend also helped push US Treasury yields lower and even safe-haven assets like the dollar and gold were in the red.
“There are concerns over China’s increasing COVID cases and how the government is going to react. We’ve gone from what we considered to be a reopening to likely greater restrictions,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.
“If you’ve got one of the largest economies coming off-line that’s going to weigh on global growth. It’s going to influence all companies one way or another.”
The Dow Jones Industrial Average (.DJI) fell 192.36 points, or 0.56%, to 34,154.67, the S&P 500 (.SPX) lost 30.51 points, or 0.76%, to 3,995.61 and the Nasdaq Composite (.IXIC) dropped 90.21 points, or 0.8%, to 11,136.14. The pan-European STOXX 600 index (.STOXX) slipped 0.50% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) shed 0.71%.
Emerging market stocks (.MSCIEF) dropped 0.94%. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 1.1% lower, while Japan’s Nikkei (.N225) lost 0.42%.
Oil prices, sensitive to the strictness of China’s lockdown as a barometer for demand, pared some losses but earlier US crude fell to its lowest level since late December 2021. Brent crude was last trading at $82.49, down 1.36% on the day, after falling to its lowest level since early January. US crude fell 0.93% to $75.57 per barrel.
In currencies, the haven Swiss franc and the Japanese yen rose, while the Australian dollar and the Chinese yuan underperformed. Meanwhile, the US dollar dipped, which analysts said was unusual given its typical safe-haven role.
“It does suggest perhaps that the swing against the dollar in the sense of the broader market mood or market positioning is perhaps running a little bit deeper this morning and that might well be significant,” Shaun Osborne, chief FX strategist at Scotiabank in Toronto, said.
Some market analysts attributed the move to the U.S. dollar. Bond yields were alleged to have fallen, which made the greenback less attractive against Japan’s currency. The dollar index fell 0.292%, and the euro rose 0.13% to $1.0409. The Japanese yen strengthened 0.28% versus the greenback at 138.71 per dollar, while the sterling was last trading at $1.2044, down 0.41% on the day. The dollar was down 0.4% against the Swiss franc after earlier falling as much as 0.77%.
In Treasuries, Benchmark 10-year notes were down 2.8 basis points to 3.674%, from 3.702% late on Friday. The 30-year bond was last down 2.7 basis points to yield 3.725%, from 3.752%, while the 2-year note was down 3.9 basis points to yield 4.4402%. Fears over Chinese economic growth hit other commodity markets, with copper and other metals also falling.
Concerns about China’s Covid policies overshadowed any support for a 25 basis point cut in the reserve requirement ratio (RRR) announced by the Chinese central bank on Friday, which would free up about $70 billion to prop up the faltering economy.
China on Monday announced a record fifth consecutive day of new local COVID cases with 40,052 infections, while protesters and police in Shanghai clashed on Sunday night as protests raged for a third day.
Protests also took place in Wuhan, Chengdu, and parts of the capital Beijing as COVID restrictions were imposed.
Gold prices gave up gains after touching a one-week high of $1763.70 an ounce. Spot gold fell 0.5% to $1,748.07 an ounce.