Covid Headwinds Derail Recovery Trades

Regional equity markets have started the week on the back foot, with HK/China markets weighed by fresh covid headwinds. This has hurt most major regional bourses, while US futures are lower, -0.20-0.30 at this stage.

• The weekend news around China covid developments has seen a further unwinding of re-opening themed trades. The CSI 300 is off 1.3% at this stage, the Shanghai Composite off 0.80%.
• Fresh restrictions in Beijing and other major cities are weighing on the outlook, as cases continue to rise and the first reported deaths since May hurt sentiment. No formal lock downs have been announced, although indicators like trips on the metro rail in major cities point to reduced economic activity.
• H-shares are off 2.2%, while the HSI is lower by 2.10%, although opened down around 3%, so we are away from worst levels. Hong Kong is reportedly close to cutting non-emergency services at public hospitals amid rising Covid cases.
• Elsewhere, Japan stocks have traded resiliently, with the Nikkei 225 sitting close to flat at this stage. The Kospi is down around 1%, while the Taiex is off by around 0.40%.
• The ASX 200 has lost a modest 0.2%, with miners weighing, as commodity prices soften.
• Malaysian stocks are down around 0.50% at this stage, as election uncertainty drives a flight to safety.