Stocks, Commodities, Yields Sink on China Outbreak: Markets Wrap

(Bloomberg) — Stocks, U.S. futures and commodities sank with Treasury yields Monday as China’s worsening Covid situation amplified concerns about a slowdown in demand in the world’s second-largest economy.

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MSCI Inc.’s Asia-Pacific gauge fell for the sixth session in seven with sharp declines in Hong Kong and China. S&P 500 and Nasdaq 100 futures contracts dropped in a sign of further weakness to come. European futures fell.

Treasuries paused the rout of the past week that roiled markets and the dollar extended an advance as investors opted for safe havens. Crude fell below $100 a barrel and iron ore slumped in Singapore. Palm oil jumped after Indonesia, the world’s largest exporter of the commodity, halted exports of cooking oil and its raw materials amid a local shortage.

China locked down some areas of Beijing and ordered mandatory Covid testing in a district as policy makers raced to prevent a repeat of the outbreak that’s hobbled Shanghai. The yuan fell to the lowest since April 2021 and led declines in emerging-market currencies.

Fears a wider lockdown in the Chinese capital amid the government’s steadfast adherence to its Covid-zero policy is spooking investors. They are worried about disruptions to the global supply chain and a deteriorating economic outlook from the Shanghai restrictions as well as disappointment at policies to shore up growth and stabilize markets.

“The worry is the current policy support that the government has already put in place may not be effective because of the Covid policies as activities are subdued,” Jenny Zeng, AllianceBernstein co-head of Asia Pacific fixed income, said on Bloomberg Television.

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The outlook for inflation continues to overhang the markets. Federal Reserve Chair Jerome Powell endorsed a 50 basis-point increase next month and at least one more such move, outlining his most bold approach yet to reining in surging prices. Stronger tightening signals from the European Central Bank are also undermining risk appetite.

“There has been little to avert the investor pessimism as inflation and interest rate expectations start to bite,” Geir Lode, head of global equities at Federated Hermes Ltd., said in a note. “In particular due to the uncertainty of the macro environment, expectations are low with regard to forward estimates and guidance, building on lowered expectations from the previous quarter.”

The war in Ukraine continues to provide an uncertain backdrop for the markets. U.S. Secretary of State Antony Blinken and Defense Secretary Lloyd Austin arrived in Kyiv for talks as Russia’s war on Ukraine enters its third month.

The euro erased gains made after Emmanuel Macron’s win on a pro-business, pro-Europe platform in the French election removed a key risk for markets. Markets in Australia and New Zealand are closed for holidays Monday.

Events to watch this week:

  • Tech earnings include Alphabet, Meta Platforms, Amazon, Apple

  • EIA oil inventory report, Wednesday

  • Australia CPI, Wednesday

  • Bank of Japan monetary policy decision, Thursday

  • U.S. 1Q GDP, weekly jobless claims, Thursday

  • ECB publishes its economic bulletin, Thursday

Some of the main moves in markets:


  • S&P 500 futures fell 0.6% as of 1:11 p.m. in Tokyo. The S&P 500 fell 2.8%

  • Nasdaq 100 futures fell 0.4% The Nasdaq 100 fell 2.7%

  • Topix index fell 1.5%

  • Kospi index lost 1.5%

  • Hang Seng Index fell 2.6%

  • Shanghai Composite Index lost 2.4%

  • Euro Stoxx 50 futures slid 1.7%


  • The Japanese yen was at 128.30 per dollar, up 0.2%

  • The offshore yuan was at 6.5728 per dollar, down 0.7%

  • The Bloomberg Dollar Spot Index rose 0.1%

  • The euro was at $1.0784



  • West Texas Intermediate crude fell 2.8% to $99.23 a barrel

  • Gold was at $1,923.28 an ounce, down 0.4%

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