Asia’s stock markets slipped on Wednesday as reality bit on hopes for a soft economic landing in the United States, curbing investors’ enthusiasm about China’s major shift in its tough zero-COVID policy.
Warnings from big U.S. banks about a likely recession next year pushed the S&P 500 (.SPX) lower for a fourth straight session on Tuesday and the brakes have come on a rally that has lasted almost two months. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.2% and Japan’s Nikkei (.N225) fell 0.7%.
“Some of the optimism that had driven the rally is being put to the test,” said Shane Oliver, head of investment strategy at Australia’s AMP. “We might be transitioning from a situation of worrying about inflation and interest rates, to one where the negatives become weakening growth and falling profits.”
China’s national health authority said on Wednesday that asymptomatic COVID-19 cases and those with mild symptoms can self-treat while in quarantine at home. While some of the changes announced echoed similar easing moves made by other countries many months ago, the announcement was the strongest sign so far that China is preparing its people to live with the disease after nearly three years of crippling restrictions that have battered the economy.
Market reaction, however, was muted as the focus shifts to how well China can execute its policy shift, especially if new COVID cases surge over winter. Analysts say the path to fully reopening the economy will be long and bumpy, and not without risk.
The Shanghai Composite Index (.SSEC) fell 0.6%, Hong Kong’s Hang Seng (.HSI) fell 1% and the yuan was broadly steady, giving up early gains. “The reality on the ground is still one of continued pressure, even as the outlook is improving somewhat,” said Mitul Kotecha, head of emerging markets’ strategy at TD Securities in Singapore.
Adding to the darkening demand outlook globally, China earlier in the day reported grim trade data for November, with both imports and exports suffering their biggest monthly falls since 2020 – auguring badly for recovery prospects. read more
SOURCE: REUTERS
