Fears over China’s worsening Covid-19 situation mount to bearish momentum. On Monday, Dow futures were down 305 points, or 0.9%, while S&P 500 and Nasdaq futures were both down 1%.
Beijing, the capital of China with 21 million people, began mass testing over the weekend and closed residential complexes, raising fears that tougher restrictions will soon be implemented in line with reports. other Chinese cities.
“Although parts of China have been under restrictions longer than Shanghai, Omicron’s arrival in Beijing would be a worrying development,” Jeffrey Halley, senior market strategist for Oanda, wrote on Monday.
“China is the world’s second largest economy and has shown no signs that it intends to live with the virus,” he said. “With that in mind, the likely pressure valve will be a disruption in China’s export machine and a crater in consumer confidence.”
Oil prices fell on Monday as worries about a faster U.S. rate hike and slowing China weighed on sentiment. U.S. oil futures and Brent, the international benchmark, both fell more than 4%.
“It looks like China is the elephant in the room and markets believe slowing Chinese growth could significantly alter the supply/demand equation in international markets,” Halley said.
The push to contain the outbreak in Beijing comes as cases continue to grow in Shanghai. The lockdown in Shanghai has already forced many factories to suspend production and worsened shipping delays, threatening to cause a major shock to its vast economy and put more strain on global supply chains.
Shanghai reported more than 19,000 new cases and 51 deaths on Sunday.