Global shares muted as investors fret over China reopening, Covid effect

Strategists at JPMorgan warned, in a research note, of a “likely infection peak” during China’s Lunar New Year holiday in January, meaning “limited holiday consumption upside”. But this, they argued, could be followed by a “cyclical upturn after nearly three years of on and off restrictions”.

In fixed income, eurozone debt markets remained under pressure after hawkish rhetoric from the European Central Bank at its December monetary policy meeting.

The two-year German government bond yield, which tracks interest rate expectations, hovered just below a 14-year high reached in the previous session, at 2.66%.

The 10-year German yield, a benchmark for eurozone borrowing costs, inched three basis points lower to 2.481%, trading around levels last seen regularly during the European debt crisis of 2011.

The yield on 10-year US Treasury notes was down two basis points to 3.837%, hovering around the five-week high of 3.862% it touched in the previous session.

The two-year US Treasury yield was down three basis points at 4.429%.

Investors have been trying to gauge how high the Federal Reserve will need to raise rates as it tightens policy in its continuing battle against inflation, while also trying to avoid tilting the economy into recession.

Futures that wager on the direction of Wall Street’s S&P 500 share index gained 0.3% in European morning trading. Contracts trading the tech-heavy Nasdaq 100 rose by the same amount.

In foreign exchange markets, the yen weakened 0.4% to 134.00 per dollar, in a partial reversal of strong gains for the Japanese currency after the nation’s central bank made a hawkish tweak to its controversial “yield curve control” policy that suppresses domestic borrowing costs.

The index, which measures the safe-haven dollar against six major currencies, rose 0.038%. Brent crude, the global oil benchmark, dropped 0.9% to $83.55.

Reuters