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Marketmind: China crisis brewing

11/27/2022 | 04:56pm EST
People hold paper sheets in Shanghai

(Reuters) - A look at the day ahead in Asian markets from Jamie McGeever.

Purchasing managers index (PMI) data will be the key economic driver for Asian markets this week, but the tone will be set by the increasingly tense political situation in China.

Thousands of people are taking to the streets in several cities across the country in an unprecedented protest against the government's stringent COVID restrictions after a deadly apartment fire in Urumqi in the country's far west.

The wave of civil disobedience and clashes between protestors and police come amid mounting frustration over President Xi Jinping's signature zero-COVID policy. China has reported record new COVID cases for four straight days.

"Down with the Chinese Communist Party, down with Xi Jinping," a crowd in Shanghai shouted in the early hours of Sunday, according to witnesses and videos posted on social media.

It's safe to say that this does not happen very often, and the world is watching intently to see how Beijing handles the brewing crisis.

From an immediate market perspective, the COVID surge and nationwide unrest snuff out any hope China is about to re-open its economy. It doesn't seem that the restrictions will be lifted any time soon, and growth will continue to suffer.

In that vein, PMI figures on Wednesday are expected to show that Chinese factory and service sector activity shrank again in November, another sign that Beijing will maintain its loose monetary policy stance.

If so, the yuan is likely to come under renewed pressure, especially after the central bank on Friday said it would cut the amount of cash banks must hold as reserves, injecting about $70 billion of liquidity into the struggling economy.

Three key developments that could provide more direction to markets on Monday:

- Australia retail sales (October)

- Fed's Williams speaks

- ECB's Lagarde speaks

(Reporting by Jamie McGeever in Orlando, Fla.; Editing by Mark Porter)

By Jamie McGeever


ę Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CHINESE YUAN RENMINBI (AUD/CNY) -0.14% 4.675407 Delayed Quote.-0.30%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) 0.12% 0.64162 Delayed Quote.0.74%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.49% 0.68846 Delayed Quote.1.53%
BRITISH POUND / CHINESE YUAN RENMINBI (GBP/CNY) 0.11% 8.167778 Delayed Quote.-2.12%
BRITISH POUND / EURO (GBP/EUR) 0.41% 1.12045 Delayed Quote.-1.18%
BRITISH POUND / US DOLLAR (GBP/USD) -0.20% 1.20194 Delayed Quote.-0.35%
CANADIAN DOLLAR / CHINESE YUAN RENMINBI (CAD/CNY) 0.09% 5.0526 Delayed Quote.-0.81%
CANADIAN DOLLAR / EURO (CAD/EUR) 0.26% 0.693505 Delayed Quote.0.22%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.32% 0.7431 Delayed Quote.1.00%
EURO / CHINESE YUAN RENMINBI (EUR/CNY) -0.27% 7.2877 Delayed Quote.-0.98%
EURO / US DOLLAR (EUR/USD) -0.60% 1.0724 Delayed Quote.0.85%
INDIAN RUPEE / CHINESE YUAN RENMINBI (INR/CNY) -0.38% 0.082096 Delayed Quote.-1.19%
INDIAN RUPEE / EURO (INR/EUR) -0.07% 0.011265 Delayed Quote.-0.57%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.66% 0.012088 Delayed Quote.0.62%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.31% 0.6305 Delayed Quote.-0.37%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) -0.23% 6.79944 Delayed Quote.-1.52%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.28% 6.7918 Delayed Quote.-1.80%
US DOLLAR / EURO (USD/EUR) 0.60% 0.932488 Delayed Quote.-0.84%
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