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China Debating Covid Quarantine ​Shifts, Risk Bounce Has Limited Follow Through

CHINA

According to Bloomberg news report (see this link), China is reportedly considering reducing the amount of time people have to spend in quarantine upon entering the country. The new proposed set up would require 2 days in a hotel, followed by 5 days at home, versus the current set up of 7 days in a hotel and 3 days at home.

  • Importantly though, this proposal still needs to be signed off by senior leaders, who are yet to be presented with it.
  • Back in June, the hotel quarantine period was cut for international travelers but this did little to shift internal/domestic covid restrictions.
  • This is a welcome step, but arguably wholesale changes around domestic covid policies is needed to boost the market's assessment of the domestic demand outlook in China.
  • The headlines from the story drove a spike in risk appetite, with US equity futures moving roughly net +0.5%, but the positivity is starting to fade. Eminis are away from best levels, back towards 3690/95 from earlier highs above 3700.
  • The USD sell-off is also being unwound. USD/CNH dipped to 7.2350/55, but is now back close to 7.2500. AUD/USD got close to 0.6270, but is now back at 0.6240/45. Earlier lows were around 0.6230.
  • Commodities also rose, notably in oil, but US yields haven't reacted much.

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