World trade slowing as economy weakens; UK retail sales slump; BT pay deal reached – business live

The Guardian
The Guardian

3.15pm GMT

Afternoon summary

A quick recap of the main points.

Asia-Pacific markets have dropped as anti-Covid lockdown protests broke out at dozens of Chinese cities last weekend.

The demonstrations, as Covid-19 infections rise at record pace, have fuelled fears that China’s economic recovery could stumble.

Oil has hit its lowest level since January, while China’s yuan fell to a two-week low, as investor anxiety rose .

UK retailers have reported a drop in sales this month , and warned that December will be weak too, as the cost of living crisis hits the sector.

World trade growth has slowed, the WTO reports, another warning sign.

And the National Grid has backed away from triggering a power-saving plan to prevent blackouts tomorrow.

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Related: Rolls-Royce and easyJet test aircraft engine running on hydrogen

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Related: FCA reveals £49m redress scheme for British Steel pensions

3.07pm GMT

National Grid avoids triggering emergency blackout plan

Good news: National Grid no longer expects to activate its emergency winter plan tomorrow.

The UK electricity network operator has told the industry that “there is no longer considered to be a requirement for DFS” (its “demand flexibility service”).

That means households and businesses won’t be asked to cut their power demand tomorrow to avert power cuts.

As we reported earlier, the DFS is designed to reduce household consumption when supply is tight, by rewarding businesses and households that shift their power usage away from times of peak demand.

The plan to trigger the DFS has been cancelled, as the Grid now believes it has enough power to keep systems running.

This means households should be free to watch the World Cup, with England and Wales playing their final group game at 7pm GMT ( other TV broadcasts are available, power permitting…. )

2.47pm GMT

BT and unions reach pay agreement

Peace is breaking out at BT, as the telco group announces a “UK Cost of Living Pay Rise” that could end strikes at the company.

BT is offering a £1,500 pay rise to all staff who earn less than £50,000 year.

The consolidated salary increase would be paid to all frontline BT staff, and 51% of managers in the UK.

When added to BT’s earlier pay increase, it means the lowest paid would receive a pay rise of over 15% this year.

Significantly, BT says that the CWU and Prospect unions will run consultative ballots recommending people vote in favour. If CWU members vote in favour, it would end the first national strike at BT in 35 years .

BT adds that its 2023 pay review has been moved to next September, and will take into account the January Cost of Living Pay Rise.

BT CEO Philip Jansen was in conciliatory mood, saying:

“This award is based on the principles we have followed throughout this difficult period. It gets help to as many of our colleagues as possible; favours our lower paid colleagues; and gives people the security of a built-in, pensionable increase to their pay.

“Crucially, it has been worked on in conjunction with the CWU. As I’ve said throughout, whatever our differences, our unions are vital partners.

2.34pm GMT
The floor of the New York Stock Exchange. Photograph: Brendan McDermid/Reuters

Wall Street has opened in the red, as the escalating anti-Covid lockdown protests in China fuel concerns over economic growth.

The S&P 500 index of US stocks has dropped by 0.7%, or 28 points, to 3,998 points.

Apple shares are down almost 2%, on reports that the disruption at its China factory could create a production shortfall of around six million iPhone Pros

Joshua Raymond , director at online investment platform says the protests in China are worrying investors, for two reasons:

First , they are likely to be met with stricter rules and measures to curtail the length and spread of protests which might mean further restrictions to activity and therefore demand.

Secondly , the unusually large and broad protests are signs of cracks appearing in Xi Jinping’s dominance, which can mean longer term instability.

Both factors create uncertainty in demand for commodities such as Oil and this is why we’ve seen investors start the week in ‘risk=off’ moods by selling stocks and moving investments into safer havens such as the Japanese Yen.”

2.21pm GMT

Lagarde: Economic growth is slowing rapidly

The eurozone’s top central banker, Christine Lagarde, has warned that European growth is slowing rapidly.

But the ECB president also kept her options open as to the size and number of the ECB’s future interest rate hikes – saying the pace of tightening will depend on several variables.

She told the European Parliament that:

“How much further we need to go, and how fast we need to get there, will be based on our updated outlook, the persistence of the shocks, the reaction of wages and inflation expectations, and on our assessment of the transmission of our policy stance.”

1.46pm GMT

Business leaders in northern England have warned the Transport Secretary there is a “crisis on our rail network”.

Members of the Northern Powerhouse Partnership have written to Mark Harper warning that a “wave of cancellations is wreaking havoc on the Northern economy”.

Related: North of England rail faces ‘utter chaos’, warns business group

1.45pm GMT

Rolls-Royce has said it has run an aircraft engine on hydrogen in what is thought to be a world first for the aviation industry, which is considering using the fuel to decarbonise air travel.

The FTSE 100 engineering company said the ground test was a “major step towards proving that hydrogen could be a zero-carbon aviation fuel of the future”, in a joint project with the airline easyJet .

The test took place outdoors at Boscombe Down, a British military facility in Wiltshire. It used a converted Rolls-Royce AE 2100-A regional aircraft engine that is generally used to power turboprop planes.

Turboprop engines are used to drive a propeller on slower-speed short-haul flights, rather than driving the fan required for faster speeds in jet engines. Building and maintaining jet engines is Rolls-Royce’s main business line.

Here’s the full story:

Related: Rolls-Royce and easyJet test aircraft engine running on hydrogen

1.32pm GMT

The WTO’s gloomy outlook will only add to the pessimism in markets.

After a grim 2022, investors fear 2023 could also be choppy as economies are dragged close to, or into, recession.

1.20pm GMT

WTO: World trade is weakening

Global trade growth is slowing, as export orders weaken and demand for container shipments and air freight drops.

The goods barometer calculated by the World Trade Organisation has sunk below its trend levels, in another signal that the global economy is weakening.

It has slipped to 96.2, down from 100.0, reflecting cooling demand for traded goods.

The WTO fears that trade growth is likely to slow in the closing months of 2022 and into 2023, “as the global economy continues to be buffeted by strong headwinds”.
WTO global trade barometer Photograph: World Trade Organisation

The report found falling export orders, and weaker demand for air freight and electronic components.

The WTO adds:

World merchandise trade volume growth continued to slow in the second quarter of 2022, with a 4.7% year‐on‐year increase similar to the 4.8% rise in the first quarter.

According to the WTO’s latest forecast, world trade is expected to decelerate further in the second half of 2022 and remain subdued in 2023 due to several related shocks, including the war in Ukraine, high energy prices, inflation, and monetary tightening in major economies.

Shipping giant Maersk warned at the start of this month that “freight rates have peaked” as global demand weakened.

Related: Shipping giant Maersk warns of looming global recession; eurozone factory slump deepens – as it happened

1.02pm GMT

The finance boss of car dealership giant Inchcape has quit, after his “personal behaviour” fell below expected standards.

Gijsbert de Zoeten, Inchcape’s chief financial officer, has voluntarily tendered his resignation, and will be standing down from the Board with immediate effect.

In a statement to the City, Inchcape explained:

This follows an incident at a recent event where, through a lapse in judgement, he displayed personal behaviour falling short of the high standards expected of the leadership of the Group.

Inchcape insisted that de Zoeten’s departure was unrelated to the company’s financial performance or strategic direction, including its acquisition of Derco , the largest automotive distributor in Latin America.

12.54pm GMT

Savers will see the rate on a fixed-rate account jump from 1% to 5% from December, HSBC UK has announced.

The rate on HSBC’s Regular Saver account is fixed for 12 months from the time of opening the account, under the bank’s terms

But HSBC UK announced on Monday that from December 1, it will increase the rate from 1% to 5%, and the rise will apply automatically to existing accounts.

Interest accrued up to this date will be at the rate offered when the account was opened.

Tom Wolfenden, HSBC UK’s head of retail, said:

“The rate is fixed for the year from the time of opening, however at this time to help with the increased cost of living and to support those who currently have a Regular Saver open, we are increasing all current Regular Saver accounts to the new rate of 5% with effect from December 1.

“Customers do not need to do anything, it will be updated automatically.”

UK interest rates have risen from just 0.25% at the start of the year to 3%, but banks have been criticised for being slow to lift savings rates in response .

Lenders are also under fire for not cutting mortgage rates quickly after turmoil in the UK bond market eased, having moved swiftly to raise them when the panic began.

12.35pm GMT

National Grid poised to start emergency winter plan as energy prices soar

The UK electricity network operator is poised to activate its emergency winter plan after energy prices rose amid falling temperatures and amid growing concern over power supplies, our energy correspondent Alex Lawson reports.

National Grid indicated that it could announce on Monday afternoon that it was issuing a requirement for consumers to use its new demand flexibility service from Tuesday, which rewards businesses and households that shift their power usage away from times of peak demand.

Energy specialists are concerned that Britain’s power systems could be threatened by lower temperatures, which increase demand; still weather reducing wind power and the slow return of a series of French nuclear reactors, which have been out of action due to maintenance.

The Met Office issued yellow bad weather warnings over the weekend and some forecasters have suggested cold weather over Russia could hit the UK next month, in an echo of the “beast from the east” snow storms which hit the UK in 2018 .

Gas and electricity prices surged on Monday morning as a result of the cold snap and forecast of worse to come. The price of gas for next-day delivery rose to 260p, up from 153p when markets closed on Friday night.

Here’s the full story:

Related: National Grid poised to start emergency winter plan as energy prices soar

12.34pm GMT

The CBI’s retail sales survey ( see here ) also highighted that shops have been hiking prices over the last year.

It found:

  • Selling prices rose extremely quickly in the year to November , at a pace just shy of the 37-year high recorded in the previous quarterly survey (+82% from +87% in August). Prices are expected to increase at a broadly similar pace next month (+81%).

  • Elsewhere, wholesale sales volumes fell considerably in the year to November (-18% from +3% in October), with a broadly similar pace of decline expected next month (-21%).

Motor retailers also reported a sharp fall in sales, with further declines feared in December.

12.23pm GMT

UK property demand falls after mini-budget rocked markets.

Demand for UK houses has also weakened, after the disastrous mini-budget drove up mortgage costs.

Property website Zoopla has reported today that demand for U.K. residential properties nearly halved year-on-year in the four weeks to November 20th, with net sales down 28%.

People selling their homes have typically had to settle for below the asking price in recent weeks, according to Zoopla, which is predicting house prices will fall by about 5% next year.

Here’s the full story:

Related: UK homeowners forced to settle for below asking price, Zoopla says

And here’s some reaction:

12.00pm GMT

Back in the markets…grain, wheat and soybean prices are falling on concerns that China’s Covid-19 outbreaks, and escalating protests, will hit its economic recovery.

Wheat is down 0.9% to its lowest level in around three months, while soybean prices are 0.4% lower, and corn is off 0.5%.

Matt Ammermann, StoneX commodity risk manage, explained:

“The news from China of more COVID cases and the unexpected protests against the government are weakening wheat, corn and soybeans today.

“There is concern in commodity markets both about the possible disruption in China from more anti-COVID measures and also the impact of protests.”

11.56am GMT

Strike news: Workers in seven train companies are to vote on whether they want to continue taking industrial action in a long-running dispute over jobs, pay and conditions.

The Transport Salaried Staffs’ Association (TSSA) is balloting more than 1,600 operational, station, control and management staff, for strike action and action short of strike.

Ballots will be held throughout December with results due just before Christmas.

The companies being re-balloted are Avanti West Coast, CrossCountry, East Midlands Railway, LNER, Northern, Southeastern and Transpennine Express (TPE).

11.40am GMT

National Grid could activate emergency winter plan to avoid blackouts

UK households might be paid to help Britain’s grid operator avoid a potential blackout on Tuesday evening, partly due to problems in the French energy grid and a drop in wind power.

National Grid’s electricity systems operator division said it is considering whether to activate a live run of its demand flexibility service for the first time on Tuesday.

The scheme, which launched at the start of this month, has already been tested twice in the last two weeks but has not yet been run for a live event.

Related: National Grid will pay households to shift electricity use to avoid blackouts

National Grid said it would decide by around 2.30pm today whether to issue the notice to suppliers and households.

Electricity demand is rising as European temperatures fall, while weak wind speeds are hitting renewable energy supplies.

Updated at 11.44am GMT

11.10am GMT

UK retail sales slide as pessimism mounts

Just in: UK retail sales weakened sharply this month as the economy weakened.

Retailers reported that demand fell this month, with stores bracing for a difficult December as consumers are hit by the cost-of-living crisis.

Expectations for sales in the coming month also weakened, to the weakest since March 2021, the CBI’s latest ‘distributive trades’ survey of UK retail shows.

Retailers are also cutting jobs – and expect to keep lowering their headcount next month.

That’s a sign of pessimism, as retailers fear that spending this Christmas will be weaker than last year.

Here are the key findings:

  • Retail sales declined in the year to November (-19% from +18% in October) with a broadly similar fall expected next month (-21%).

  • Sales volumes were seen as average for the time of year (+3% from +20% in October) and are expected to remain broadly in line with seasonal norms in December (-1%).

  • Online retail sales contracted in the year to November (-5% from -23% in October). Internet sales have now been flat or falling for 13 months, and an accelerated contraction (-26%) is expected next month.

  • Retailers remained notably pessimistic about the business situation over the next three months (-22%), to a similar extent to August (-22%).

  • Employment growth in retail slumped in the year to November (-17% from +13% in August) – the first decline in headcount since August 2021. A further fall (-12%) is anticipated next month.

  • Retailers expect to reduce investment in the next 12 months compared to the previous 12 (-38% from -31% in August), to the greatest extent since May 2020.

Martin Sartorius , principal economist at the CBI, says retailers are facing a tough time.

“It’s not surprising that retailers are feeling the chill as the UK continues to be buffeted by economic headwinds. Sales volumes fell at a firm pace in the year to November, and retailers remain notably downbeat about their future business prospects.

This pessimism is reflected in investment intentions worsening to the greatest extent since May 2020.

Updated at 11.28am GMT

10.56am GMT

Barclays’ chief executive, CS Venkatakrishnan, has been diagnosed with non-Hodgkin lymphoma, the bank has announced.

Venkatakrishnan will be undergoing treatment for the next 12 to 16 weeks.

In a letter to staff, Venkatakrishnan explained that “the good news is that the matter has been detected early”, with scans and biopsies confirming it to be very localised.

Venkatakrishnan, who was described as unflappable and popular with staff when he was appointed as CEO a year ago, wrote:

The doctors have advised that my prognosis is excellent, and my condition is curable with their prescribed regimen.

During this period, the company will run normally, and I will continue to be actively engaged in managing it. However, I will have to work from home for some periods and not be able to travel. Fortunately, I have always exercised regularly and am strong and fit as I commence this treatment.

Very best wishes for a speedy recovery, Venkat.

10.43am GMT

XM: Market nervous about protests

The outlook for oil has worsened today, sending crude down around 3%.

Investors are worried that authorities will clamp down hard against the protesters in China, and tighten restrictions even more, with daily infections at daily highs.
Major asset price moves today Photograph: XM

Raffi Boyadjian , lead investment analyst at XM , explains:

Risk assets took a knock at the start of the week as worries about instability in China and how the country’s unyielding zero-Covid policy might further blight the outlook led investors to search for safety. Anti-lockdown protests started spreading after a deadly fire in Xinjiang last Thursday where residents were reportedly unable to escape the residential complex due to the harsh Covid restrictions.

But the protests erupted further over the weekend, turning into nationwide demonstrations against the government’s handling of the pandemic as anger boiled over. It is yet unclear how authorities plan to quell the ever-growing unrest given their unprecedented scale, or just how much more widespread these protests will become.

But this is uncharted territory for President Xi Jinping and the Communist Party, and it is making the markets nervous.

10.22am GMT

The US stock market is on track to open lower.

The tech-focused Nasdaq futures contract is down 1.1%, while the S&P 500 futures is off 0.9%.

The analyst team at Saxo Bank say the unrest in China has rattled markets:

Dramatic scenes of widespread protests in China against Covid policies there have pulled sentiment lower, with US yields dipping to new local lows and crude oil prices pushing on cycle lows even after Friday’s drop.

The US dollar has firmed against most currencies, but the Japanese yen is stronger still as the fall in yields and energy prices support the currency. This is a sudden powerful new distraction for markets when this week was supposed to be about incoming US data.

10.12am GMT

Worst day in a month for China stocks

China’s stock market posted its worst one-day fall in a month today, as investors worried about the protests against Covid-19 restrictions.

The CSI 300 shed 42 points to finish at 3,733 points, a two-week low.

The selloff was led by ‘academic and educational services’, property companies, financial companies and miners.

A U.S. crackdown on Chinese tech giants citing national security concerns also weighed on shares of technology firms, Reuters points out.

Gary Ng, economist at Natixis, says:

“The market does not like uncertainties that are difficult to price and the China protests clearly fall into this category. It means investors will become more risk-averse.”

The CSI 300 is down 25% this year, caught up in the global selloff

9.58am GMT

The gold price has nudged higher, up around $5 to $1,761 per ounce.

Rupert Rowling , market analyst at Kinesis Money , says bullion is popular as a safe-haven today:

Gold has been lifted by market jitters as a result of the protests in China about continuing lockdown restrictions.

With equities down, gold has climbed back to around $1,760 an ounce as investors seek out the precious metal as a haven.

9.37am GMT

The cost of insuring China’s debt against default has risen a little today.

China five-year credit default swaps have risen by 6 basis points to 79bps, according to S&P Global Markets intelligence. That’s still low (showing the debt is seen as safe), but it shows rising edginess in the markets.

9.28am GMT

Europe’s oil and gas share index is down almost 2%, on worries that demand from China could weaken.

AJ Bell investment director Russ Mould explains:

“China is a rapacious consumer of global commodities and signs economic activity is being disrupted by the mounting dissent in the country will be seen as negative for demand. It’s worth noting that unrest is already affecting business in China including Apple which has seen violent clashes at one of its facilities in Zhengzhou.

“In the medium term the protests could be positive for growth if they persuade Beijing to adopt a looser approach to Covid but given how strident Xi Jinping has been in pursuing the hard-line policy, it’s difficult to see it being surrendered easily.

“Part of the problem for China is vaccination levels are behind those seen in other parts of the world and this means a ‘living with the virus’ strategy comes with substantial risks attached.”

9.15am GMT

Apple "to lose 6 million iPhone Pros" from China tumult
Protesters facing off against security personnel in white protective clothing at the factory compound operated by Foxconn Technology Group last week.
Photograph: AP

Bloomberg are reporting that the turmoil at Apple’s key manufacturing hub of Zhengzhou could create a production shortfall of close to 6 million iPhone Pro units this year

They say:

The situation remains fluid at the plant and the estimate of lost production could change, the person said, asking not to be named discussing private information.

Much will depend on how quickly Foxconn Technology Group , the Taiwanese company that operates the facility, can get people back to assembly lines after violent protests against Covid restrictions. If lockdowns continue in the weeks ahead, production could be set further back.

The Zhengzhou campus has been wracked by lockdowns and worker unrest for weeks after Covid infections left Foxconn and the local government struggling to contain the outbreak. Thousands of staff fled in October after chronic food shortages, only to be replaced by new employees who rebelled against pay and quarantine practices.

Videos fro Zhengzhou have shown police in China beating workers who protesting over working conditions and pay at the iPhone factory. More here :

Related: Police beat protesting iPhone workers as Covid cases hit record high in China

Shares in Apple are down around 1.4% in premarket.

9.06am GMT

Martin Petch , vice president at Moody’s Investors Service , has said the ratings agency expected the protests in China “to dissipate relatively quickly and without resulting in serious political violence”.

But he cautioned:

“However, they have the potential to be credit negative if they are sustained and produce a more forceful response by the authorities.”

8.54am GMT

Market Report: Chinese protests send waves of unease across financial markets
Chinese Yuan banknotes are seen behind an illuminated stock graph Photograph: Dado Ruvić/Reuters

The “unprecedented waves of protest in China” have caused ripples of unease across financial markets, explains Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Worries are mounting about the repercussions for the world’s second-largest economy, she explains:

As demonstrations spread across the country from Beijing to Xinjiang and Shanghai, reflecting rising anger about the zero-Covid policy, a sustained recovery in demand across the vast country appears even further away.

This has piled fresh downwards pressure on the oil price, with Brent Crude dropping to $81 a barrel, the lowest level since early January.

Already pockets of violence have erupted as police forces push back at protestors, but there are expectations that a much more stringent security clampdown will be ordered.

This is all dashing hopes of an easing of restrictions, given that Xi JinPing will not want to look like he’s backing down in the face of protests.

8.38am GMT

Yuan falls to two-week low

China’s yuan has fallen to the lowest in over two weeks against the US dollar.

The onshore yuan has closed at 7.1999 to the dollar, the lowest in over two weeks.

That shows investors are worried how Beijing would react to the wave of protests, at a time when Covid-19 cases are rising at record speed.

Chris Weston, head of research at brokerage Pepperstone, explained:

We’re really looking at the government response to what’s happening ... the government response is so unpredictable, and of course that just means derisking.

8.33am GMT

The drop in the oil price gives G7 nations an opportunity to tighten the financial pressure on Vladimir Putin.

So argues Robin Brooks , chief economist at the Institute of International Finance:

8.28am GMT

European stock markets have also opened lower:

8.24am GMT

FTSE 100 index drops at the open

Britain’s blue-chip share index has fallen half a percent at the start of trading.

The FTSE 100 index has shed 39 points to 7447 points, falling back from last week’s two-month highs.

Oil giants BP (-2%) and Shell (-1.8) are among the top fallers, along with Asia-Pacific focused financial firms HSBC (-1.3%) and Standard Chartered (-1.6%).

Mining giants are also in the red, tracking the drop in iron ore and copper prices.

8.21am GMT

The economic and market headwinds hitting China are unlikely to abate significantly over the coming months, warns Mark Haefele, chief investment officer at UBS Global Wealth Management.

He predicts Beijing policymakers will focus on stabilizing the economy, rather than spurring growth, adding:

  • Rising COVID-19 infections remain a significant drag on growth.

  • Support for the property sector looks sufficient to limit the damage but may not spur faster growth.

  • A widening of infections could add to supply chain interruptions, with China’s problems spilling into global markets.

8.20am GMT

Commodities sink as China's Covid outbreak worsens
Cranes unloading imported iron ore from a cargo vessel at a port in Lianyungang, Jiangsu province. Photograph: China Stringer Network/Reuters

Other commodity prices are also sinking this morning, amid fears over China’s worsening virus situation and the series of protests in several cities.

Iron ore futures in Singapore slumped more than 3% at one stage today, while Chinese copper futures declined as much as 1.8%.

Traders are concerned that China’s economic growth could be derailed, as infections rise at a record pace and more lockdowns are imposed. That would sap demand for energy, food and raw materials.

As Bloomberg points out:

A return to stricter lockdowns would further squeeze demand for a number of key commodities.

China is the largest importer of everything from oil to iron ore and soybeans, and purchases have already slowed this year as the economy has stumbled.

7.58am GMT

Brent crude oil hits lowest since January

Brent crude, the oil benchmark, has fallen almost 3% to its lowest level since January. as China’s Covid protests fuel demand fears.

Brent is trading at $81.48 per barrel, while US crude is below $75/barrel for the first time in around 11 months.
The Brent crude oil price over the last year Photograph: Refinitiv

Politcl uncertainty and the surge in Covid-19 cases in China are both weighing on the oil price, which is a bellwether of growth prospects.

Naeem Alsam , chief market analyst at Avatrade , says:

Basically, it is demand that is creating the main issue for the price, and the fact that we have a potential recession threat and now the covid issues in China, things are becoming difficult for oil traders

The reality is that no one wants to see more lockdowns in China, as a situation like this creates nothing but more headwinds for oil prices.

7.49am GMT

Full story: Clashes in Shanghai as protests over zero-Covid policy grip China

The wave of civil disobedience –- triggered by a deadly apartment fire in the far west of the country last week –- is unprecedented in mainland China in the past decade.
Protesters holding up pieces of paper against censorship and China's strict zero Covid measures in Beijing today. Photograph: Kevin Frayer/Getty Images

My colleagues Helen Davidson and Verna Yu report:

In the early hours of Monday in Beijing, two groups of protesters totalling at least 1,000 people were gathered along the Chinese capital’s 3rd Ring Road near the Liangma River, refusing to disperse.

On Sunday in Shanghai, police kept a heavy presence on Wulumuqi Road, which is named after Urumqi, and where a candlelight vigil the day before turned into protests.

“We just want our basic human rights. We can’t leave our homes without getting a test. It was the accident in Xinjiang that pushed people too far,” said a 26-year-old protester in Shanghai who declined to be identified.

Related: Clashes in Shanghai as protests over zero-Covid policy grip China

Updated at 7.52am GMT

7.43am GMT

Introduction: Oil and stocks hit by China protests
A currency trader at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea. Photograph: Ahn Young-joon/AP

Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.

Global stock markets are on edge as the protests intensify at major Chinese cities against the country’s stringent zero-Covid rules.

Stocks have fallen across Asia-Pacific markets, while oil has dropped to a near 11-month low, as public demonstrations in cities including Shanghai, Beijing, Chengdu, Wuhan and Guangzhou pose a growing challenge to president Xi’s zero covid policies.

China’s CSI 300 share index fell sharply in early trading, before closing down over 1%. Hong Kong’s Hang Seng is down 1.3% in late trading.

European markets are set to open lower.

On Sunday, hundreds of demonstrators and police have clashed in Shanghai, as frustration mounts nearly three years into the pandemic.

The record rise in Covid-19 cases has added to public anger, explains Victoria Scholar, Head of Investment, at interactive investor :

Rare protests have broken out across major Chinese cities in a backlash against the ongoing draconian zero-tolerance to Covid approach from the authorities that has inhibited the freedoms of Chinese citizens since the start of 2020 and that has sharply damaged China’s economic growth.

As a result, international investors have become a lot more cautious towards China with the unrest weighing on the Shanghai Composite, the Hang Seng Index and the Chinese yuan in today’s trade.

In mid-November China reduced its quarantine time for international travel by two days, suggesting that Beijing was finally starting to ease its strict lockdown measures and helping to lift travel and casino stocks amid optimism towards the potential economic reopening.

However that optimism has faded fast with China recording another record high level of covid infections on Monday, adding to the sense of frustration after this weekend’s protests.

With optimism about China’s recovery taking a knock, investors are selling out of stocks and oil in favour of safe havens such as dollar, yen and Treasuries.

Stephen Innes , managing partner at SPI Asset Management , explains:

It certainly doesn’t help when many are confined to their apartments watching the World Cup, saw thousands of mask-less fans in Qatar enjoying life that has long been lost in COVID zero haze.

Social discontent could increase in China over the coming months testing policymakers’ resolve to stick to the COVID zero mandates. And since China’s economy is currently in a tug-of-war between weakening macroeconomic fundamentals and increasing reopening hopes.

Mass protests would deeply tilt the scales in favour of an even weaker economy and likely be accompanied by a massive surge in Covid cases, leaving policymakers with a considerable dilemma.

The agenda

  • 11am GMT: CBI survey of UK distributive trades (retail industry)

  • 2pm GMT: ECB president Christine Lagarde testifies to the European Parliament’s Committee on Economic and Monetary Affairs

  • 3.30pm GMT: Dallas Fed Manufacturing Index

Updated at 9.26am GMT

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