Stocks closed lower on Monday as social unrest from China’s prolonged Covid restrictions weighed on markets. The Dow Jones Industrial Average lost 497.57 points, or 1.45%, to end at 33,849.46. The S&P 500 dropped 1.54% to end at 3,963.94. The Nasdaq Composite ended down 1.58% to close at 11,049.50.
Monday’s selloff was driven by demonstrations that broke out in mainland China over the weekend as people vented their frustrations with Beijing’s zero-Covid policy. Local governments tightened Covid controls as cases surged, even though earlier this month Beijing adjusted some policies that suggested the world’s second-biggest economy was on its way to reopening.
The developments reverberated across global markets in Monday trading, with West Texas Intermediate crude futures briefly dipping to $60 a barrel while U.S. Treasury yields held near recent lows. Investors sought safety in haven assets such as gold, which hit a more than two-week high, and the Japanese yen strengthened against the dollar.
China has been largely successful in keeping its Covid infection rates low since the pandemic began last year, but a recent resurgence in cases has prompted a return to stringent lockdown measures in many parts of the country. Over the weekend, demonstrations broke out in several cities as people vented their frustration with the lockdown policies, which have disrupted businesses and daily life.
While it’s still early days, the unrest poses a potential risk to stability in China and could weigh on economic growth if it persists. That could have ripple effects across global markets, given China’s importance as a driver of global growth. For now, investors are taking a wait-and-see approach as they monitor the situation closely.
Conclusion:
Monitoring the situation closely for now, it remains yet to be seen what effect -if any- the social unrest will have on Chinese and global economies moving forward. It is possible that potential risk to stability in China and disruption of businesses and daily life could weigh on economic growth globally if it persists; however investors are holding steady for the time being as they await further development of this story.
