Stock market red: China shakes markets; Eye on oil

By: MRT Desk

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Stock market red: China shakes markets; Eye on oil

European markets are trading lower on Monday -Ibex 35, Cac 40, DAX…-, pending protests in major Chinese cities against the harsh restrictions that China is carrying out in its zero COVID policy, which increase investor concern about the implications of growth for the world’s second largest economy.

The main Asian stock exchanges -Nikkei, Shanghai Composite and Hang Seng- They also register decreases.

According to theAssociated PressandFinancial Times, the protests pose the biggest challenge to the Chinese Communist Party’s authority since the Tiananmen Square protests in 1989, with demonstrators chanting the departure of President Xi and the country’s Communist Party.

The pressure on the commodity market is also noticeable, with theWTIand theBrentChina is the top importer and the country’s protests are stoking concerns about demand.

“There is a lot of bewilderment in the face of the revolts, with a policy that is ‘ruining’ the middle class of the country. The main problem is that investors do not know how they can affect the markets, not knowing what the response of the Chinese authorities will be, “they explain in Link Securities.

“The stock markets give in to the pressure they could generate in the short term on demand and production chains. We will see if the protests translate into a faster lifting of restrictions or on the contrary generate more problems”, they comment in Renta 4 (BME:RTA4).

In this context, according to these experts, the dollar appreciates slightly (1.035USD/EUR) and the IRR of the T-bond continues to fall (-4 bps to 3.64%, adding to last week’s -15 bps).

“As ‘money’ is fearful, and until the situation is clarified, we expect investors to adopt a prudent attitude, which will lead to the reduction of positions in riskier assets and, probably, a commitment to those with a more defensive cut,” they conclude in Renta 4.

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