Chinese shares posted their biggest drop in nearly a month on Monday, hit by the country’s harsh Covid-19 clampdown in Shanghai and other areas. This also impacted stocks in Hong Kong, where the Hang Seng Index fell by more than 3%.
Continuing unease over tightening monetary policy in the United States and the effects of more extended lockdowns on the Chinese economy weighed heavily on sentiment.
“With the government doggedly sticking to its Covid-zero policy, fears are increasing that an extended lockdown in the country, which may spread to other major industrial cities, will darken an already cloudy outlook for China’s growth,” OANDA senior market analyst Jeffrey Halley said.
Also on AF: China’s Inflation Tops Forecasts as Supply Pressures Worsen
Electric vehicle maker Nio Inc suspended production as China faces its worst coronavirus outbreak in two years, while battery giant Contemporary Amperex Technology (CATL) implemented a “closed-loop management” system at its main factory to keep production going.
Shares of Nio dropped roughly 8% in Hong Kong, while CATL lost 7.3% in Shenzhen.
EV makers in China produced far fewer cars in total than expected in March, due to strict pandemic curbs.
Dampening sentiment further, China’s producer price index increased 8.3% year-on-year, easing from 8.8% growth in February. The consumer price index inched up 1.5% year-on-year, the fastest pace in three months.
Also, yields on China’s 10-year government bonds fell below US Treasury yields for the first time in 12 years, raising concern that yuan-dominated assets have become less attractive.
China New Energy Firms Slip
China’s blue-chip CSI300 index fell 3.1% to 4,100.07, while the Hang Seng Index was down 3.03%, or 663.71 points, to 21,208.30. The Hang Seng Tech Index was down 5.24%.
The Shanghai Composite Index dropped by 2.61%, or 84.72 points, to 3,167.13, while the Shenzhen Composite Index on China’s second exchange dipped 3.33%, or 69.32 points, to 2,011.45.
Shares of new-energy firms slipped 5.5%, new energy vehicles plunged 6.5%, while automobiles declined 4.7%.
Stocks in semiconductors and non-ferrous metals tumbled roughly 5% each, while consumer staples and real estate developers lost 1.7% and 2.6%, respectively.
Outflows through the Northbound leg of Stock Connect totalled 2.87 billion yuan ($450 million), according to Refinitiv data.
Tokyo stocks closed lower on Monday as investors awaited key US economic data. The benchmark Nikkei 225 index lost 0.61%, or 164.28 points, to 26,821.52, while the broader Topix index slid 0.38%, or 7.15 points, to 1,889.64.
Indian stocks dropped with Mumbai’s signature Nifty 50 index down 0.44%, or 78.00 points, at 17,706.35.
Taipei and Seoul were also down, while Sydney and Jakarta posted slight gains.
March US Consumer Price Report
Ten-year Treasury yields rose as high as 2.784% during Asia-Pacific trading hours, the highest level since January 2019, for a 125 basis point rise so far this year.
Markets have raced to price in the risk of larger rate hikes from the Federal Reserve with futures implying rises of 50 basis points at both the May and June meetings.
This underlines the importance of the March US consumer price report on Tuesday where the median forecast is for a leap of 1.2%, taking annual inflation to an eye-watering 8.5%.
Oil prices fell after countries such as the US announced plans to release crude from strategic stocks, as China’s lockdowns continued.
Brent crude futures were trading lower by 2.2% at $100.50 per barrel and US crude futures were down 2.4% at $95.92 per barrel.
Gold was little changed at $1946.00 an ounce after a 1.1% gain last week.
Key figures around 0810 GMT
Tokyo – Nikkei 225 > DOWN 0.61% at 26,821.52 (close)
Hong Kong – Hang Seng Index > DOWN 3.03% at 21,208.30 (close)
Shanghai – Composite > DOWN 2.61% at 3,167.13 (close)
Brent North Sea crude > DOWN 1.61% at $101.05 per barrel
West Texas Intermediate > DOWN 1.91% at $96.38 per barrel
New York – Dow > UP 0.4% at 34,721.12 (Friday close)
- Reuters with additional editing by Sean O’Meara
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