Mainland Chinese shares continue falling amid Covid fears as Beijing expands mass testing

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SINGAPORE — Futures pointed to a mixed open for markets in Asia-Pacific as investors are set to closely watch market reaction to Covid fears in China as Beijing expands mass testing.

Japan’s Nikkei futures contract in Chicago was at 26,875 while Osaka futures were at 26,810 — higher than the Nikkei 225’s last close at 26,590.78.

Futures however pointed to a lower open for Australian stocks, with markets returning from a holiday on Monday. The SPI futures contract was at 7,298, against the S&P/ASX 200’s last close at 7,473.3.

Markets reacted negatively to news that Covid is spreading more rapidly in China, prompting fears of additional lockdowns and reduced output. This directly impacted Asian markets and also rippled through global financial markets.
ANZ Research
Brian Martin and Daniel Hynes

In earnings, HSBC is set to report its first-quarter results. Economic data for Tuesday will include South Korea’s gross domestic product for the first quarter.

Chinese markets in the day ahead will be top-of-mind for investors. Mainland and Hong Kong stocks plunged Monday as worries over a Covid surge and potential lockdowns in Beijing took hold.

Markets will be watching for reaction to Beijing announcing late Monday that mass testing will be expanded to another 10 districts and one economic development area, according to Reuters.

“Markets reacted negatively to news that COVID is spreading more rapidly in China, prompting fears of additional lockdowns and reduced output. This directly impacted Asian markets and also rippled through global financial markets,” ANZ Research analysts Brian Martin and Daniel Hynes wrote in a Tuesday note.

U.S. stocks were in negative territory earlier in the day, but recovered by the close. The Dow Jones Industrial Average cut a nearly 500-point intraday loss Monday, rising 238.06 points, or 0.7%, to 34,049.46. The S&P 500 ticked up 0.6% to 4,296.12. The tech-heavy Nasdaq Composite gained 1.3% at 13,004.85.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 101.752, extending its rise from levels just above 101.

The Japanese yen traded at 128.02 per dollar, a touch firmer than levels above 128.1 earlier. The Australian dollar was at $0.7177, trading slightly down from around $0.718 earlier.

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