Asian stocks slide as Covid deepens China growth fears
Asian stocks were down again on Tuesday as China’s growth outlook darkened due to the expected long-term impact of Beijing’s tough “zero-Covid” policies.
A strong Wall Street rally failed to change the mood in Asia and even Beijing’s pledge of political support for its struggling economy had little effect.
Beijing’s latest support package, which includes more than 140 billion yuan ($21 billion) in additional tax refunds, bringing the total amount of tax relief this year to 2.64 trillion yuan, could not cheer up as the new Covid-19 slows down the country. capital fueled concerns about slowing growth.
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Banks cut forecasts in China
Investment banks slashed their forecasts for the world’s second-largest economy and Chinese stocks tumbled as tech and industrial firms led a deepening recession in afternoon trade.
The Shanghai Composite Index ended down 2.41% at 3,070.93, posting its biggest decline since April 25. The blue-chip CSI300 index fell 2.34%, its biggest drop since May 6.
Tech companies, which have led a market rebound since late April, fell sharply. The CSI Info Tech Index fell 4.23% and Shanghai’s technology-focused STAR50 Index fell 4.73%.
Hong Kong stocks closed lower on worries about the Chinese economy and the Hang Seng Index fell 1.75%, or 357.96 points, to 20,112.10, extending losses from the previous day. The Shenzhen Composite Index on China’s second largest stock exchange slid 3.62%, or 72.28 points, to 1,922.48.
Tokyo stocks also fell despite this overnight rally on Wall Street. The benchmark Nikkei 225 index fell 0.94%, or 253.38 points, to 26,748.14 while the broader Topix index slid 0.86%, or 16.31 points to 1,878.26.
Indian shares slid with Mumbai’s Nifty 50 index down 0.55%, or 89.55 points, to close at 16,125.15.
Seoul was down 1.6%, while Taipei, Sydney, Singapore and Manila were all down. Bangkok was flat while Jakarta won.
The dollar index weakens
Globally, stocks fell as disappointing corporate results and fears of slowing growth halted the mini-recovery of recent trading days.
Nasdaq futures fell 2% as traders blamed a profit warning from Snap, which saw the Snapchat owner’s shares fall 28%, while S&P 500 futures tumbled 1.25%.
This followed a 1.2% tumble in MSCI’s broadest index of Asia-Pacific stocks outside Japan, while the benchmark STOXX index of European stocks fell 0.92%.
The dollar index, which tracks its performance against a basket of major currencies, meanwhile fell 0.3% to 101.81, a one-month low.
Markets had been reassured by US President Joe Biden’s comment on Monday that he was considering easing tariffs on China, and by Beijing’s continued stimulus promises.
The damage of Covid in China
But China’s zero Covid policy and its lockdowns have already done considerable economic damage.
“Following disappointing April activity data, we have again downgraded our China GDP forecast and now expect 2Q GDP to contract by 5.4% annualized, previously. ‒1.5%,” analysts warned of JP Morgan.
“Our Q2 global growth forecast comes in at just 0.6% annualized, by far the weakest quarter since the global financial crisis outside of 2020.”
Japan’s manufacturing activity grew at the slowest pace in three months in May amid supply bottlenecks, while Toyota announced a reduction in production plans.
Analysts have also lowered growth forecasts for the United States as the Federal Reserve looks certain to raise interest rates by one percentage point over the next two months.
The hawkish message is expected to be delivered this week by a host of Fed speakers and the minutes of the final policy meeting scheduled for Wednesday.
Tokyo – Nikkei 225 > DOWN 0.94% to 26,748.14 (closing)
Hong Kong – Hang Seng Index > DOWN 1.75% to 20,112.10 (closing)
Shanghai – Composite > DOWN 2.41% to 3,070.93 (close)
London – FTSE 100 > DOWN 0.57% to 7,470.84
New York – Dow > UP 1.98% to 31,880.24 (close Monday)
- Reuters with additional editing by Sean O’Meara