Hong Kong stocks fall 2% on China unrest, oil drops to lowest in 2022

Both U.S. crude futures and Brent crude futures shed more than 2% each in Asia’s morning trade as fears on demand from China faltering came into focus.

West Texas Intermediate futures fell as low as $73.86 per barrel, the lowest levels since Dec. 2021, while Brent crude futures slipped to $81.16 per barrel at the session’s lows so far.

WTI was last down 2.58% at $74.31 per barrel, while Brent crude last traded 2.37% lower at $81.65 per barrel.

— Abigail Ng

China’s latest move to cut the reserve requirement ratio for banks by 25 basis points won’t have much significance on its economy without a drastic shift from its stringent Covid restrictions, according to Economist Corporate Network.

“Consumer and investor sentiment has been so damaged by these policies that you’re not going to see any recovery in any meaningful sense until there’s a shift,” Mattie Bekink, the China director at the organization, said on CNBC’s “Squawk Box Asia.”

Bekink emphasized how sensitive investor sentiment has affected markets previously.

“We’ve already seen markets move quite significantly based on basically rumors that Beijing was going to relax — that was just a few weeks ago,” she said.

“The lockdowns seem to be endless and relentless,” Bekink said.

— Jihye Lee

Global currencies will also be at risk of weakening along with the offshore Chinese yuan amid unrest in China on its zero-Covid policies because of how supply chains may be affected, according to Standard Chartered.

“The key question for how the world reacts is how the Chinese supply chain responds,” Steven Englander, Standard Chartered Bank’s managing director said on CNBC’s “Squawk Box Asia.”

“If it gets further disrupted, I think it’s a risk-off thing,” he said. “Not just CNH, but other currencies will be at risk.”

Englander added that traders may be looking to reduce their exposure to further risk.

— Jihye Lee

Crude oil futures slipped early in Asia as high Covid cases, virus restrictions and unrest in China raise fears about demand from the world’s second-largest oil consumer.

West Texas Intermediate futures shed 0.35% to $76.01 per barrel, while Brent crude futures lost 0.26% to $83.41 per barrel.

Oil prices saw sharp falls last week as “mounting lockdowns in China raised concerns over demand,” ANZ Research’s Brian Martin and Daniel Hynes wrote in a Monday note.

“This remains a headwind for oil demand,” they said, adding that the impact of rising Covid cases was reflected in China’s mobility data as well.

— Abigail Ng

The offshore Chinese yuan sharply weakened against the U.S. dollar amid negative sentiment over unrest in China over Covid restrictions.

The currency weakened around 0.8% against the U.S. dollar to 7.2529 in Asia’s morning trade.

The dollar index rose 0.32% to 106.29, with investors likely seeing the greenback as a safe haven asset as concern over China grows.

— Jihye Lee