China is one of the only countries in the world still applying a strict "zero Covid" policy, with repeated lockdowns and almost daily PCR tests of the population.
As a result, futures on the S&P 500, the Dow and the Nasdaq 100 were down by around 0.6% this week.
This comes after global equity markets scored a positive weekly performance last week. In Europe, the Stoxx Europe 600 gained 1.7%. In the US, the S&P 500 gained 1.5%, while in Asia, the Nikkei 225 was up 1.4%.
The equity markets' good run was fueled by a renewed risk appetite among investors, who believe that the Fed will pivot towards a more dovish stance between now and the end of next year, without having totally destroyed the economic momentum.
The context is still difficult right now. We just had the implosion of the speculative bubble surrounding crypto-currencies, we have Britain's economic difficulties, there is the ongoing war in Ukraine and now protests in mainland China against the zero Covid policy. This unrest has been making headlines in the business press since the weekend. It has to be said that Chinese outbursts against the Party's authority are rare and often spectacular. From the West, it is difficult to measure the extent of the movement at this stage, but investors have already started to make assumptions. Some see this as another reason why the promised rebound of the Chinese economy is not for now. Others think that this will accelerate the lifting of health restrictions and ultimately benefit the country's dynamics.
These tensions in China are also weighing on oil, which was already battered by recession fears. Along with the inverted yield curve, this is another sign that a recession is looming.
This week, all eyes will be on the US jobs report and on Fed Chair Jerome Powell's speech.
Economic highlights of the day:
There are no major statistics today, but two speeches by Christine Lagarde from the ECB and James Bullard and John Williams from the Fed.
The dollar is down 0.90% against the euro to EUR 0.9559 and inches down 0.2% against the pound to GBP 0.8281. The ounce of gold is holding steady around 1753 dollars. Oil is still under pressure, with North Sea Brent at USD 81.35 per barrel and US WTI light crude at USD 74.16. The yield on 10-year US debt remains near 3.63%. Bitcoin is falling back to USD 16,200.
In corporate news:
* Apple fell 1.8% in premarket trading as Bloomberg reported that disruptions at the Zhengzhou, China, factory of its subcontractor Foxconn could cut iPhone Pro production by nearly six million units.
* Tesla is down 2.3% in pre-market trading due to concerns about China, with anti-COVID-19 measures in the country facing unprecedented protests, particularly in Shanghai, where one of the automaker's plants is located.
* Joe Biden's administration decided Friday to ban the sale of new telecommunications equipment by Chinese groups Huawei Technologies and ZTE on U.S. soil because of an "unacceptable risk" to U.S. national security.
* Biogen fell by 4.5% before the stock market after a report published on Sunday by the Science.org website of a death in a clinical trial of the treatment against Alzheimer's disease of the American laboratory.
* Boeing - The Pentagon is considering a proposal by the U.S. aircraft manufacturer to provide Ukraine with small, cheap precision bombs that would allow Kyiv to strike behind Russian lines, industry sources said.
* Philip Morris International announced on Monday that it will implement a squeeze-out of the remaining shares of Swedish Match, in which it now holds 93.1% of the capital following a public tender offer allowing it to request the delisting of the Swedish group.
* KKR announced Friday evening that it had signed a strategic partnership with French insurer April to become its majority shareholder.
- Beyond Meat: Barclays downgrades to underweight from equal-weight. PT down 21% to $10.
- J D Wetherspoon: Jefferies remains Buy with a price target reduced from GBp 1175 to GBp 850.
- Jet2: HSBC upgrades from neutral to buy targeting GBp 1125.
- Just Group: Jefferies starts tracking as Buy, targeting GBp 115.
- Live Nation: Citi upgrades to buy from neutral. PT up 20% to $82.
- Mitchells & Butlers: Jefferies remains Buy with a price target reduced from GBp 320 to GBp 170.
- Penn Entertainment: J.P. Morgan downgrades to neutral from overweight.
- The Restaurant Group: Jefferies remains Buy with a price target reduced from GBp 130 to GBp 45.
- Transdigm: Wells Fargo Securities downgrades to equal-weight from overweight. PT up 3.7% $660.
- Tyson: Barclays downgrades to underweight from equal-weight. PT down 14% to $58.
- Twilio: Jefferies downgrades to hold from buy. PT up 3% to $50.
- Watches of Switzerland: Goldman Sachs upgrades to neutral from buy, targeting GBp 1045.
- Williams-Sonoma: Morgan Stanley cut its recommendation to underweight from equal-weight. PT down 18% to $100.
- Wynn Resorts: J.P. Morgan upgrades to overweight from neutral. PT up 21% to $91.