Constituent policy

Global markets rattled by Wall Street and China’s zero Covid pledge

By Laura He and Mark Thompson, CNN Business

Global markets fell on Friday after Wall Street suffered its worst day of the year.

The main European indices fell at the start of the session. They followed stocks in Asia, which sold off as China pledged to meet its zero covid policy fueled concerns about the world’s second largest economy.

Hong Kong’s Hang Seng index fell 3.8%, dragging Asian markets down and posting its worst daily decline in more than a month. Tech stocks have seen a strong sell-off, with the Hang Seng Tech index down 5.2%.

Mainland China’s benchmark Shanghai Composite Index and its tech-heavy counterpart Shenzhen Component Index both fell more than 2%. The Japanese Nikkei opened lower, but reversed its losses later in the day. It ended up increasing by 0.7%.

In the foreign exchange markets, the Chinese yuan depreciated against the US dollar, reaching its lowest level in a year and a half years. It pared some losses in the afternoon to settle at 6.71 to the US dollar.

In Europe, London’s FTSE 100 index fell more than 1%. The German DAX and the French CAC 40 fell 1.4% and 1.6% respectively. The pound, which lost 2% against the dollar on Thursday after the Bank of England predicted a hard landing for the British economy, slipped to $1.23.

The losses came after the Dow fell more than 1,100 points and the S&P 500 fell 3.7% on Thursday, wiping out Wednesday’s gains as investors worried about the impact of the rise US interest rates and the risk of recession.

Investors in Asia are also nervous after the latest comments from senior Chinese leaders on its efforts to stop the spread of the coronavirus.

President Xi Jinping has said all levels of government must “resolutely” adhere to the country’s zero Covid policy. He made the remarks during a meeting Thursday with the Communist Party’s Politburo Standing Committee – the country’s top decision-making body.

Officials at all levels of government must “resolutely fight against all words and deeds distorting, doubting and denying China’s Covid control policy”, Xi said.

“This may serve to dampen some hopes of any policy changes from Covid-19, suggesting that the economic recovery will remain protracted and uneven,” Yeap Jun Rong, market strategist at financial services firm IG, wrote on Friday. Group.

China’s zero Covid policy has weighed heavily on the country’s economy. In April, the gigantic service sector contracted at the second fastest rate on record as Covid lockdowns hit businesses hard. China’s manufacturing sector also contracted last month, dragging down the economy.

— Nicole Goodkind contributed to this report.

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