April 25, 2024

Asia-Pacific Markets Fall, with China’s COVID Concerns Rising

On Wednesday, Asia-Pacific Markets were down with indexes in greater China leading losses because of resurging COVID-19 concerns. On the other hand, oil futures that had plunged overnight recorded gains.

Index performance

Earlier in the trading session, there was a more than 2% fall in the Hang Seng index in Hong Kong and it closed the day with a loss of 1.22% that bringing it to 21.586.66. This was because of a 4.8% decline in CNOOC. There was also a loss of 3.4% in the shares of HSBC, the British bank, listed in Hong Kong.

This was because the countercyclical buffer rate was increased by the Bank of England (BoE) to 2% from 1%. There was also a fall in the mainland Chinese markets. There was a 1.43% drop in the Shanghai Composite, which closed the day at 3,355.35 and a 1.25% loss was reported in the Shenzhen Component, as it ended the day at 12,811.33.

There was a 1.2% drop in the Nikkei 225 index in Japan, which brought it to 26,107.65 and a 1.23% fall in the Topix index brought it to 1,855.97. The Kospi index in South Korea also shed 2.13% to come down to 2,292.01, while a 0.84% fall was seen in the Kosdaq that bringing it to 744.63. A 0.52% drop in the Australian S&P/ASX 200 was also seen, which ended the day at 6,594.5.

A 1.14% drop was also seen in the MSCI’s index of Asia-Pacific shares with the exception of Japan.

China’s COVID issue

Market analysts said that the new wave of COVID testing in Shanghai had fueled concerns about lockdowns being imposed once more in China. This would undoubtedly have a ripple effect on other markets as well.

A statement said that mass testing would be conducted in a number of districts in Shanghai, as coronavirus cases were identified in the city earlier in the week. As of Monday, there were about 11 Chinese cities that had restricted local movement, while this number had stood at five in the last week.

US Markets

On Tuesday, there was a sharp decline in US stock indexes before they rallied again in afternoon trading. There was a 1.75% increase in the tech-heavy Nasdaq Composite, as it closed at 11,322.24, while a 0.16% rise was seen in the S&P 500 which took it to 3,831.39. Meanwhile, the Dow Jones Industrial Average lost 0.4%, or 129.44 points.

According to analysts, there is no denying that the biggest issue for the markets right now is the possibility of an economic recession. The yield on US government bonds, both 10 years and 2 years, inverted, which is an indicator of recession. Yields of shorter duration are usually lower than that of higher duration.

However, the 2-year yield was seen 2.8059 last, which was above 2.8017, the yield for 10-year bonds. Therefore, markets are now focused on recession and this is applicable across all markets, including commodity ones. Other markets like fixed income and equity have already seen impacts of the possibility.

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