U.S. stock futures fell, oil prices declined and Chinese stocks suffered their worst selloff in more than two years as Beijing sticks to its zero-Covid strategy while faced with increasing cases in major cities.
Futures for the S&P 500 declined 0.8% Monday. Contracts for the tech-focused Nasdaq-100 retreated 0.7% and futures for the Dow Jones Industrial Average fell 0.8%. The Dow posted its worst one-day percentage change since October 2020 on Friday, tumbling nearly 1,000 points.
Investors are worried that strict policies China has in place to combat Covid-19 will further disrupt global supply chains. Continued disruptions to manufacturing and the movement of goods since the start of the pandemic have contributed to U.S. inflation reaching a four-decade high. New lockdowns in China and Russia’s war against Ukraine are likely to add to price increases.
On Monday, the Shanghai Composite and CSI 300 indexes fell 5.1% and 4.9% respectively. Those were the largest single-day percentage declines for both benchmarks since February 2020, in the early days of the pandemic.
The offshore yuan fell about 1% to trade at about 6.59 per dollar. That was the lowest since November 2020, according to FactSet. The decline built on a selloff last week that ended months of relative stability.
“The problem with inflation is it can get embedded and we see inflation getting quite sticky,” said Sebastian Mackay, a multiasset fund manager at Invesco. “What we’re seeing is a combination of the war in Ukraine and the lockdown in China causing supply issues.”
Limitation of movement in China could also sap demand for oil. Brent crude, the international benchmark for oil, fell 4.5% to $101.39 a barrel. Despite the decline, oil prices still remain near historically high levels due to concerns about disruptions to energy markets from Russia’s invasion of Ukraine.
Elevated inflation has caused the Federal Reserve to increase efforts to…
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