(Paris) The fear of confinement in Beijing brought down world stock markets on Monday, already weighed down by the monetary tightening in the United States, a cocktail that could threaten economic growth.
Posted at 7:56 a.m.
Chinese stock markets fell: Shanghai lost 5.13%, Shenzhen 6.48% and Hong Kong 3.73%.
Europe was on the same trend: Paris fell by 2.10% and London by 1.99%, weighed down respectively by luxury and mining. Frankfurt lost 1.46% and Milan 1.48% around 7:35 a.m.
Wall Street was also expected to decline, according to the futures contracts of the three main indices which lost around 0.70%.
Markets are worried that new coronavirus cases reported in Beijing will push Chinese authorities into strict lockdowns in the capital, as is already happening in Shanghai, disrupting supply chains.
“Fears that (the policy) zero COVID-19 will torpedo Chinese growth” are growing, worries Jeffrey Halley, analyst at Oanda.
Taking advantage of its safe haven status, the US dollar rose against several major currencies, including the euro (+0.60%) and the pound (+0.80%).
Raw materials are failing
These fears spilled over into the oil and metals markets, where prices were falling, with the prospect of limited demand in China, the world’s largest importer of raw materials.
The barrel of Brent from the North Sea for delivery in June fell 4.17% to 102.20 dollars.
The barrel of American West Texas Intermediate (WTI) for delivery the same month also yielded 4.11% to 97.88 dollars.
The oil majors followed suit, such as BP (-4.44%), Shell (-3.68%), or TotalEnergies (-3.14%).
On the London Metals Exchange, copper yielded 2.26% and aluminum 4.48%, at 3100 dollars per ton, a level not seen since the invasion of Ukraine by Russia.
Mining stocks were also affected: Anglo American fell by 7.37%, Glencore by 6.93%, Rio Tinto by 5.44%, ArcelorMittal by 7.28%.
Added to these economic disturbances is the risk of tighter and faster monetary tightening than investors had hitherto expected and could penalize US growth.
Faced with inflation, Jerome Powell, chairman of the Fed, said Thursday that a hike in key rates of half a percentage point “was on the table” for the next monetary meeting in early May.
These remarks “underlined the gigantic pivot that the Fed has made in just a few weeks”, underlines Neil Wilson, analyst of Markets.com. He does not consider “not really plausible” a rate hike of 75 basis points, unlike other financial players.
As for the re-election of French President Emmanuel Macron, it left the markets indifferent.
He “is the continuity/stability candidate, so the market is not reacting to his expected victory,” asserts Neil Wilson.
In Sri Lanka, which is experiencing its worst economic crisis since its independence, the Colombo Stock Exchange closed again on Monday after a plunge of 12.6% for its first session after two weeks of closing.
Luxury takes a hit
Fears about activity in China never bode well for the luxury sector, which is very dependent on this market.
Hong Kong-listed Prada fell 5.05%. In Europe, LVMH fell by 3.56%, Kering by 4.18%, Burberry by 4.56%, Moncler by 3.70% and Richemont by 5.55%.
Twitter is considering Musk’s proposal
Twitter is reviewing the purchase proposal made by Elon Musk, and discussions took place on Sunday between the two camps, after the boss of Tesla said Thursday that he had secured the sum necessary for this transaction, according to the Wall Street Journal.
Twitter action took more than 5.7% in electronic trading prior to the opening of Wall Street.
Roche disappoints
Swiss pharma giant Roche reported better-than-expected first-quarter sales, driven by a rebound in its pharma business and still strong sales of COVID-19 tests. But its action lost 2.26%, due to a slight disappointment in its pharmaceutical division.
Earnings season continues this week with many U.S. tech companies due out on Tuesday and Thursday.