China Protests

Chinese assets slumped Monday as a sense of chaos and uncertainty gripped traders after growing protests against Covid curbs complicated the nation’s path to reopening. The Hang Seng China Enterprises Index declined more than 4% early Monday before paring losses by about half. The onshore yuan weakened as much as 1% at the open, the most since May. Goldman Sachs said China could end its Covid-zero policy before April, earlier than widely expected.

Recession Trade

The bond market is zeroing in on a US recession next year, with traders betting that the longer-term trajectory for interest rates will be down even as the Federal Reserve is still busy raising its policy rate. Long-dated Treasury yields are already below the Fed’s overnight benchmark range — currently 3.75% to 4% — and there’s still an extra percentage point of central bank increases priced in for the coming months. Activity has also emerged in the options market that suggests some are hedging against the risk that policy rates will halve from the current level.

iPhone Bonus

Apple partner Foxconn is offering bonuses of as much as $1,800 to existing workers at its Zhengzhou facility, hoping to sustain the staff levels it needs to run the world’s largest iPhone factory. The top-up will add as much as 13,000 yuan per month in December and January for full-time workers who’d joined at the start of November or earlier. Last week, Foxconn offered similar bonuses for workers opting to leave.

Oil Drop

Oil tumbled to the lowest level since December as unrest in China hurt investors’ appetite for risk and the outlook for energy demand, adding to stresses in an already-fragile global crude market. West Texas Intermediate sank below $75 a barrel after three weeks of losses. The dollar rose on demand for havens after protests over harsh anti-virus curbs spread across the largest crude importer over the weekend.

Coming up

European stocks are on course to follow Asian shares lower as protests against Covid curbs in China and a stronger dollar sapped sentiment. The EU is set to resume contentious talks on capping Russian oil prices. ECB President Christine Lagarde testifies in the European Parliament. Traders will also hear from the Fed’s John Williams and James Bullard. Expected data include Finnish business and consumer confidence, Austrian manufacturing PMI and Irish retail sales. CD Projekt, S Immo and JSW are among companies poised to report earnings.

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(Source: Bloomberg, Nov. 28-2022)