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Asia Shares, Oil Prices Skid on China COVID Outbreaks

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Asia Shares, Oil Prices Skid on China COVID Outbreaks

(CTN News) – As investors worried about the economic effects of new COVID-19 limitations in China, Asian shares markets and oil prices fell on Monday. As a consequence of this risk aversion, Treasuries and the currency benefited.

As the city’s COVID case counts increased on Monday, Beijing’s most populated district recommended citizens remain at home, while at least one area in Guangzhou was shut down for five days.

The sudden increase in breakouts throughout the nation has dashed expectations for an early relaxation of stringent pandemic restrictions, one of the factors cited for last week’s 10% drop in oil prices.

Early trading saw a 1.3% decline in Chinese blue chips (.CSI300), which contributed to a 1.4% decline in MSCI’s broadest index of Asia-Pacific equities outside of Japan (.MIAPJ0000PUS). South Korea’s.KS11 index fell 1.2% while Japan’s Nikkei (.N225) remained unchanged.

Nasdaq futures were down 0.2%, while S&P 500 futures fell 0.3%. FTSE futures were down 0.2%, while EUROSTOXX 50 futures fell 0.4%.

Black Friday sales will indicate how customers are faring and the outlook for retail companies, but the Thursday U.S. Thanksgiving holiday and the distraction of the soccer World Cup may lead to light trade.

The U.S. Federal Reserve’s most recent meeting minutes are expected on Wednesday, and judging by how policymakers have resisted market easing lately, they could seem hawkish.

Raphael Bostic, president of the Atlanta Federal Reserve, said on Saturday that he was prepared to scale back to a half-point increase in rates in December, but he also emphasised that rates will likely remain elevated for longer than markets anticipated.

According to futures, there is an 80% possibility that rates will increase by 50 basis points to 4.25–4.5% and peak at 5.0–5.25%. Rate reductions are also anticipated until late next year.

According to Bruce Kasman, head of research at JPMorgan, “we are certain that the slowdown in U.S. prices and European GDP creates a slowing in the pace of tightening beginning next month.”

However, “central banks also need strong signs that labour markets are relaxing” for them to take a break, he said.

“The most recent data from the United States, the Eurozone, and the United Kingdom hint to just a little moderating of labour demand, while news on wages speaks to persistent pressures.”

This week, rate increases are anticipated from the central banks of Sweden and New Zealand, maybe by an excessive 75 basis points.

At least four Fed representatives have booked speeches for this week as a teaser for the chairman’s address on November 30 that will outline the outlook for rates at the December policy meeting.

Priced For Recession

The yield curve is the most inverted it has been in 40 years, which indicates that bond markets believe the Fed will tighten policy too much and send the economy into recession.

The 10-year note yield fell to 3.79%, 72 basis points lower than the two-year.

Although speculative futures positioning has gone net short on the dollar for the first time since mid-2021, the Fed’s chorus has helped the currency stabilize following a recent steep sell-off.

Despite last week’s recovery from a low of 137.67 yen, the dollar barely changed at 140.36 yen on Monday. The euro dropped 0.2% to $1.0298 and is still well behind the four-month high of $1.1481.

The U.S. dollar index increased 0.25% to 107.180, moving above its low of 105.300 last week.

Oil prices fell again after losing 10% last week.

According to Jonas Goltermann, a senior markets economist at Capital Economics, “given how much U.S. bond rates and the dollar have fallen in a previous couple of weeks, we believe there is a high probability that they return if the Fed minutes are in line with the recent hawkish tone from members.”

The FTX exchange, which has applied for U.S. bankruptcy court protection, claims it owes its 50 largest creditors about $3.1 billion while the upheaval in the cryptocurrency market continued unabatedly.

After falling 1.2% last week, gold was slightly lower on the commodities markets, trading at $1,747 an ounce.

Following last week’s crushing, which saw Brent drop 9% and WTI about 10%, oil futures could not find a floor.

U.S. crude for January decreased by 90 cents to $79.18 a barrel, while Brent fell further 98 cents to $86.64.

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