Global stocks, oil prices slip as rising COVID cases prompt Chinese lockdowns

An investor watches stock prices at a brokerage office in Beijing, China July 6, 2018. (Jason Lee, Reuters)

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NEW YORK — Global stocks and oil prices slipped on Monday as a spike in COVID-19 cases and newly-recorded deaths in China prompted authorities in the world’s second-largest economy to reinstate lockdowns, triggering worries over the impact on the economy.

Beijing’s most populous district urged residents to stay at home on Monday as the city’s COVID case numbers rose, while at least one district in Guangzhou was locked down for five days.

“It looked like zero COVID was moving in the right direction and everyone was excited but the Chinese government is taking some strong action and in the short term there’s going to be fits and starts,” said Thomas Hayes, chairman of Great Hill Capital in New York.

MSCI’s broadest index of world shares fell 0.92%, while European stocks were steady.

On Wall Street, all three major indexes were trading lower, led by a selloff in technology, energy and consumer discretionary stocks.

The Dow Jones Industrial Average fell 0.29% to 33,646.88, the S&P 500 lost 0.58% to 3,942.36 and the Nasdaq Composite dropped 1.16% to 11,017.01.

Oil prices touched their lowest level since early January on concerns of lower Chinese fuel demand owing to the COVID-19 lockdowns as well as reports that Saudi Arabia and other OPEC members are holding talks on a potential output increase.

Brent crude futures for January fell 5.32% to $75.82 a barrel, while US West Texas Intermediate (WTI) crude futures for December were down 5.19% to $83.07.

“With oil, there’s always the supply and demand picture and right now the market is looking for some insight on the demand side,” said Cliff Hodge, chief investment officer at Cornerstone Wealth in Charlotte, North Carolina.

“Typically oil demand will plummet going into a slowdown or global recession especially this year, which we think is going to be somewhat exacerbated by China,” Hodge added.

The US dollar advanced against most major currencies, recovering recent losses, as traders shunned riskier currencies over concerns about the global economic outlook from the COVID curbs in China. The dollar index rose 0.926%, while the euro was down 0.87% to $1.0234.

Longer duration US Treasury yields dipped slightly at the beginning of a Thanksgiving holiday-shortened week, following data indicating the US economy was slowing down. The yield on 10-year notes was down to 3.8119%, while the 30-year Treasury bond yield slid to 3.8961%.

Gold prices slipped to their lowest in over a week as the dollar extended gains, while the market’s attention turned to the US Federal Reserve’s November meeting minutes due this week.

Spot gold dropped 0.8% to $1,735.89 an ounce, while US gold futures fell 0.90% to $1,736.10 an ounce.

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