Oil, yuan and stocks slide as China protests send ‘waves of unease’ across markets – business live | Business

China’s stock market posted its worst one-day fall in a month today, as investors worried about the protests against Covid-19 restrictions.

The CSI 300 shed 42 points to finish at 3,733 points, a two-week low.

The selloff was led by ‘academic and educational services’, property companies, financial companies and miners.

A U.S. crackdown on Chinese tech giants citing national security concerns also weighed on shares of technology firms, Reuters points out.

Gary Ng, economist at Natixis, says:

“The market does not like uncertainties that are difficult to price and the China protests clearly fall into this category. It means investors will become more risk-averse.”

The CSI 300 is down 25% this year, caught up in the global selloff

Bloomberg are reporting that the turmoil at Apple’s key manufacturing hub of Zhengzhou could create a production shortfall of close to 6 million iPhone Pro units this year

They say:

The situation remains fluid at the plant and the estimate of lost production could change, the person said, asking not to be named discussing private information.

Much will depend on how quickly Foxconn Technology Group, the Taiwanese company that operates the facility, can get people back to assembly lines after violent protests against Covid restrictions. If lockdowns continue in the weeks ahead, production could be set further back.

The Zhengzhou campus has been wracked by lockdowns and worker unrest for weeks after Covid infections left Foxconn and the local government struggling to contain the outbreak. Thousands of staff fled in October after chronic food shortages, only to be replaced by new employees who rebelled against pay and quarantine practices.

Videos fro Zhengzhou have shown police in China beating workers who protesting over working conditions and pay at the iPhone factory. More here:

Shares in Apple are down around 1.4% in premarket.

The “unprecedented waves of protest in China” have caused ripples of unease across financial markets, explains Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Worries are mounting about the repercussions for the world’s second-largest economy, she explains:

As demonstrations spread across the country from Beijing to Xinjiang and Shanghai, reflecting rising anger about the zero-Covid policy, a sustained recovery in demand across the vast country appears even further away.

This has piled fresh downwards pressure on the oil price, with Brent Crude dropping to $81 a barrel, the lowest level since early January.

Already pockets of violence have erupted as police forces push back at protestors, but there are expectations that a much more stringent security clampdown will be ordered.

This is all dashing hopes of an easing of restrictions, given that Xi JinPing will not want to look like he’s backing down in the face of protests.

China’s yuan has fallen to the lowest in over two weeks against the US dollar.

The onshore yuan has closed at 7.1999 to the dollar, the lowest in over two weeks.

That shows investors are worried how Beijing would react to the wave of protests, at a time when Covid-19 cases are rising at record speed.

Chris Weston, head of research at brokerage Pepperstone, explained:

We’re really looking at the government response to what’s happening … the government response is so unpredictable, and of course that just means derisking.

Britain’s blue-chip share index has fallen half a percent at the start of trading.

The FTSE 100 index has shed 39 points to 7447 points, falling back from last week’s two-month highs.

Oil giants BP (-2%) and Shell (-1.8) are among the top fallers, along with Asia-Pacific focused financial firms HSBC (-1.3%) and Standard Chartered (-1.6%).

Mining giants are also in the red, tracking the drop in iron ore and copper prices.

Other commodity prices are also sinking this morning, amid fears over China’s worsening virus situation and the series of protests in several cities.

Iron ore futures in Singapore slumped more than 3% at one stage today, while Chinese copper futures declined as much as 1.8%.

Traders are concerned that China’s economic growth could be derailed, as infections rise at a record pace and more lockdowns are imposed. That would sap demand for energy, food and raw materials.

As Bloomberg points out:

A return to stricter lockdowns would further squeeze demand for a number of key commodities.

China is the largest importer of everything from oil to iron ore and soybeans, and purchases have already slowed this year as the economy has stumbled.

Brent crude, the oil benchmark, has fallen almost 3% to its lowest level since January. as China’s Covid protests fuel demand fears.

Brent is trading at $81.48 per barrel, while US crude is below $75/barrel for the first time in around 11 months.

Politcl uncertainty and the surge in Covid-19 cases in China are both weighing on the oil price, which is a bellwether of growth prospects.

Naeem Alsam, chief market analyst at Avatrade, says:

Basically, it is demand that is creating the main issue for the price, and the fact that we have a potential recession threat and now the covid issues in China, things are becoming difficult for oil traders

The reality is that no one wants to see more lockdowns in China, as a situation like this creates nothing but more headwinds for oil prices.

The wave of civil disobedience –- triggered by a deadly apartment fire in the far west of the country last week –- is unprecedented in mainland China in the past decade.

My colleagues Helen Davidson and Verna Yu report:

In the early hours of Monday in Beijing, two groups of protesters totalling at least 1,000 people were gathered along the Chinese capital’s 3rd Ring Road near the Liangma River, refusing to disperse.

On Sunday in Shanghai, police kept a heavy presence on Wulumuqi Road, which is named after Urumqi, and where a candlelight vigil the day before turned into protests.

“We just want our basic human rights. We can’t leave our homes without getting a test. It was the accident in Xinjiang that pushed people too far,” said a 26-year-old protester in Shanghai who declined to be identified.

Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.

Global stock markets are on edge as the protests intensify at major Chinese cities against the country’s stringent zero-Covid rules.

Stocks have fallen across Asia-Pacific markets, while oil has dropped to a near 11-month low, as public demonstrations in cities including Shanghai, Beijing, Chengdu, Wuhan and Guangzhou pose a growing challenge to president Xi’s zero covid policies.

China’s CSI 300 share index fell sharply in early trading, before closing down over 1%. Hong Kong’s Hang Seng is down 1.3% in late trading.

European markets are set to open lower.

On Sunday, hundreds of demonstrators and police have clashed in Shanghai, as frustration mounts nearly three years into the pandemic.

The record rise in Covid-19 cases has added to public anger, explains Victoria Scholar, Head of Investment, at interactive investor:

“Rare protests have broken out across major Chinese cities in a backlash against the ongoing draconian zero-tolerance to Covid approach from the authorities that has inhibited the freedoms of Chinese citizens since the start of 2020 and that has sharply damaged China’s economic growth.

As a result, international investors have become a lot more cautious towards China with the unrest weighing on the Shanghai Composite, the Hang Seng Index and the Chinese yuan in today’s trade.

In mid-November China reduced its quarantine time for international travel by two days, suggesting that Beijing was finally starting to ease its strict lockdown measures and helping to lift travel and casino stocks amid optimism towards the potential economic reopening.

However that optimism has faded fast with China recording another record high level of covid infections on Monday, adding to the sense of frustration after this weekend’s protests.

With optimism about China’s recovery taking a knock, investors are selling out of stocks and oil in favour of safe havens such as dollar, yen and Treasuries.

Stephen Innes, managing partner at SPI Asset Management, explains:

It certainly doesn’t help when many are confined to their apartments watching the World Cup, saw thousands of mask-less fans in Qatar enjoying life that has long been lost in COVID zero haze.

Social discontent could increase in China over the coming months testing policymakers’ resolve to stick to the COVID zero mandates. And since China’s economy is currently in a tug-of-war between weakening macroeconomic fundamentals and increasing reopening hopes.

Mass protests would deeply tilt the scales in favour of an even weaker economy and likely be accompanied by a massive surge in Covid cases, leaving policymakers with a considerable dilemma.

The agenda

• 11am GMT: CBI survey of UK distributive trades (retail industry)

• 2pm GMT: ECB president Christine Lagarde testifies to the European Parliament’s Committee on Economic and Monetary Affairs

• 3.30pm GMT: Dallas Fed Manufacturing Index