Today China developments are dominating headlines, with COVID frustrations boiling over as lockdowns triggered civil unrest in multiple cities including in Beijing and Shanghai – where police appeared to struggle to disperse crowds. The protests reflect the most direct challenge to party authority since Tiananmen Square in 1989 with protesters openly chanting for the CCP and President Xi to step down.
Obviously this is a complex situation with the direct cause of the protests (ie zero-COVID strict lockdown policies) being mixed up with the underlying lack of democratic freedoms and strict control of dissent overseen by the CCP, therefore it is hard for markets to latch on to an obvious outcome.
The government is yet to publicly respond, but there are fears the protests may turn violent and prompt a crackdown by the authorities. The situation adds another layer of uncertainty to China’s expected COVID reopening, with some thoughts it might encourage a faster reopening.
However, China daily COVID infections continue to hit new record highs as outbreaks spread across the country and the Chinese press hasreiterated support for the zero-COVID strategy. The lack of an effective vaccination program in China appears to be the main block to easing restrictions and meanwhile China has stepped up monetary policy support with the PBOC cutting the RRR by 25bp and injecting liquidity into markets.
As a result of the China uncertainty the Hang Seng closed down -1.6%, with a modest knock on in other Asian markets and we saw the Nikkei close down -0.4%.
Closer to home in Europe, markets are off this morning with both the STOXX 600 and FTSE 350 down around -0.80. S&P 500 Futures are currently indicating the US will open down -0.5% this afternoon and sterling is currently trading at 1.21 versus the US dollar.
Bond yields continue to decline from recent peaks with UK 10Y gilts yielding 3.1%, US 10Y Treasuries yielding 3.7% and German 10Y Bunds yielding 2.0%. #marketupdate #Synergi #financialplanning #financialadvisor