Imports crept up 0.7 percent in April to USD 222.5 billion, in line with the previous month’s sub-1 percent growth. Companies and investors worry the ruling Communist Party’s “zero-COVID” strategy that temporarily closed most businesses in Shanghai and other industrial centers is disrupting global trade and activity in autos, electronics, and other industries.
Investor mood was pushed down by interest rate hikes and a faltering Chinese economy on Monday. In early trade, European stocks and Asian benchmarks both dipped. As global demand deteriorated, China’s exports climbed 3.7 percent year over year to USD 273.6 billion in April, down dramatically from March’s 15.7 percent growth. After Shanghai and other industrial cities were shut down to combat virus outbreaks, this added to the pressure on the world’s second-largest economy.
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But a slowing global economy is also taking a toll. “The blame rests partly with China’s COVID-19 outbreak, which has led to manpower shortages and bottlenecks in the logistics sector. But the extent of these disruptions shouldn’t be overplayed,” Julian Evans-Pritchard said in a commentary. “Instead, the drop in exports seems to mostly reflect softer demand.” France’s CAC 40 slipped 1.4 percent in early trading to 6,172.41.
Germany’s DAX fell 1.1 percent to 13,520.87. Britain’s FTSE 100 was down 1.1 percent at 7,306.34. US shares were set to drift lower with Dow futures dipping 1.3 percent to 32,388.0. S and P 500 futures fell 1.5 percent to 4,058.75. The Shanghai Composite was little changed, adding nearly 0.1 percent to 3,004.14. Markets were closed in Hong Kong for a national holiday. Japan’s benchmark Nikkei 225 lost 2.5 percent to finish at 26,319.34. South Korea’s Kospi dipped 1.3 percent to 2,610.81.
Australia’s S and P/ASX 200 dropped 1.2 percent to 7,120.70. The benchmark in Jakarta, Indonesia, lost 4.4 percent as markets reopened after the Eid al-Fitr holiday last week. Investors were watching for the outcome of the presidential election in the Philippines, although it remains unclear how economic policies might change. The son of long-ago overthrown Philippine dictator Ferdinand Marcos is the top contender in Monday’s vote, based on most voter-preference surveys.
A turbulent week on Wall Street ended on Friday with more losses and the stock market’s fifth straight weekly decline. The pullback came as investors balanced a strong US jobs report against worries the Federal Reserve may cause a recession in its drive to halt inflation. The S and P 500 ended with a loss of 0.6 percent. The Dow Jones Industrial Average fell 0.3 percent, while the Nasdaq slid 1.4 percent. The Russel 2000 slid 1.7 percent to 1,839.56.
Apart from concerns about inflation and coronavirus restrictions, the war in Ukraine is still a major cause of uncertainty. More than 60 people were feared dead after a Russian bomb flattened a school being used as a shelter, Ukrainian officials said. Moscow’s forces pressed their attack on defenders inside Mariupol’s steel plant in an apparent race to capture the city ahead of Russia’s Victory Day holiday on Monday.
“Russia’s Victory Day today will also bring geopolitical risks back into the limelight as well. President Putin is likely to reiterate his justification for the Ukraine war but markets may be watching for any further efforts to ramp up military operations to secure the war,” said Yeap Jun Rong, market strategist at IG in Singapore.
The Fed is hoping to raise rates and slow the economy enough to snuff out the highest inflation in four decades, but it risks choking off growth if it goes too far or too quickly. In energy trading, benchmark US crude fell USD 1.29 cents to USD108.48 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the basis for pricing oil for international trading, edged down USD 1.15 cents to USD 111.24 a barrel. In currency trading, the US dollar rose to 131.13 Japanese yen from 130.55 yen. The euro cost USD 1.0517, down from USD 1.0545.
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