In the wake of widespread protests in China against the country’s draconian Covid-19 regulations, global markets plummeted on Monday.
To a large extent, European markets followed the trend of Asian shares and begun the day on a negative note. All three major indices went down; the FTSE 100 (UKX) shed 0.7%, the CAC 40 (CAC40) lost 0.6%, and the DAX (DAX) lost 0.5%.
After recovering from earlier losses, the Hang Seng (HSI) Index, Hong Kong’s primary stock market, ended the day 1.6% lower. It was down as much as 4.2% at the session’s start. For mainland Chinese enterprises listed in Hong Kong, as measured by the Hang Seng (HSI) China Enterprises Index, the day ended with a loss of 1.7%.
Following an initial drop of 2.2%, the Shanghai Composite recovered some ground to close 0.8% down than Friday’s close on the Chinese mainland. The technology-focused Shenzhen Component Index lost 0.7% of its value.
On Monday morning, the renminbi (which is shorthand for the Chinese yuan) fell against the dollar. For a short period of time, the onshore yuan, which is used for transactions within China’s strictly regulated domestic market, fell by 0.9%. By midday, it had down 0.5% to $7.213/$1 and was continuing to lose ground. The dollar gained 0.3% against the currency, reaching 7.213 in offshore trading.
According to Stephen Innes, managing partner of SPI Asset Management, the falling value of the yuan is evidence that “investors are running ice cold on China,” and that the currency may be “the simplest barometer” of local and international investors’ sentiments.
Oil falls nearly 3%
The majority of Asian stock markets closed lower. At market close, the Nikkei 225 (N225) in Japan was down 0.4%, the S&P/ASX 200 in Australia was down 0.4%, and the Kospi in South Korea was down 1.2%.
The Dow futures were down 0.3%, or 108 points, indicating a downward opening for US markets. The S&P 500 futures fell 0.5%, while the Nasdaq futures fell 0.6%.
China worries sent commodity prices tumbling as well. Investors’ fears that rising Covid cases and demonstrations in China could dampen demand from one of the world’s top oil consumers led to a dramatic decline in oil prices.
Market prices for US crude futures dropped $2.70 to $74.22 a barrel. The price of a barrel of Brent crude oil, used as a benchmark for the oil market around the world, fell by 2.9% to $81.25.
China’s central bank reduced the reserve requirements for lenders for the second time this year on Friday, the day before the protests began. Almost all banks have seen a 0.25 percentage point decrease in their reserve requirement ratio (RRR).