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As the end of the year approaches, global markets are still under the weight of the policy of increasing interest rates, with fears of an increase in Corona cases in China after the lifting of the measures of the zero-Covid policy. European shares fell on growing fears of a slowdown in economic growth, and the Nikkei index closed lower, following weak Wall Street results.
As for the strong dollar, it stabilized on Thursday, following a rise in yields on long-term US government bonds. Oil prices fell due to the impact of the increase in Corona cases in China.
European stocks and the influence of central banks
European shares fell on Thursday amid limited holiday trading as markets neared the end of a difficult year in which they suffered from geopolitical tensions and growing fears of an economic slowdown due to decisions by central banks to raise interest rates across the board.
The Stoxx 600 index fell 0.4 percent. For the whole year so far, it has decreased by 12.8 percent.
After a brief recovery this week, markets around the world are worried about Beijing’s move to further ease Covid-related restrictions, after a surge in infections in China undermined hopes for a quick recovery in the world’s second-largest economy.
The performance of China-exposed luxury goods companies such as LVMH and Richemont overshadowed the European index in early trading.
Shares of energy companies fell by 0.6 percent, and of mining companies by 0.3 percent, following the prices of raw materials.
Japanese stocks and Wall Street
As for Japan’s Nikkei index, it ended lower on Thursday after falling to its lowest level in about three months during the session, tracking the impact of Wall Street’s lackluster performance, with major technology stocks leading the decline.
The Nikkei index closed down 0.93 percent, after reaching 25,953.92 points during trading, the lowest level since October 3. The broader Topix index fell 0.72 percent to 1,895.27 points.
Wall Street’s major indexes closed lower last night, with the Nasdaq hitting a 2022 low, as investors braced to enter 2023 amid mixed economic data, a rise in coronavirus injuries in China and geopolitical tensions.
Heavy tech stocks weighed on the Nikkei index, with startup investment group SoftBank Group down 1.6 percent and recouping some of its losses after falling 2.4 percent to its lowest level since Oct. 19.
Japan Tobacco Co. is at the top of the index with a drop of 5.87 percent, followed by Showa Denko with 4.68 percent and Isetan Mitsukoshi Holdings with 4.37 percent.
34 stocks on the Nikkei index advanced, compared with declines of 182 stocks.
All 33 sub-indices fell, except for two, and the index of oil exploration companies led the decline.
The dollar is stabilizing
The dollar steadied after long-term US government bond yields rose last night, on initial optimism that China will ease Corona restrictions and open up the economy, according to Reuters.
After China lifted its quarantine rule for incoming travelers from January 8, countries such as the United States, Japan and India said they would require coronavirus tests for people arriving from China.
The speed with which China lifted its coronavirus rules has strained its fragile health system and raised concerns about the spread of the virus.
The Japanese yen rose nearly 0.5 percent to 133.83 yen per dollar.
The British pound rose 0.19 percent to $1,204, but was not far from a three-week low of $11,993 last week.
And the euro rose 0.15 percent to $1.0628.
Uncertainty about the global economic outlook, as well as growing concerns about a recession in the United States, sent yields on two-year US government bonds, which typically move in line with interest rate expectations, lower last night. It amounted to 4.3512 percent.
Meanwhile, the yield on the benchmark 10-year US Treasury bond hit 3.8656 percent, after rising to a more than one-month high of 3.892 percent last night.
The dollar index, which measures the US currency’s performance against a basket of currencies, settled at 104.28.
The Australian dollar rose 0.16 percent to $0.6751, while the New Zealand dollar rose 0.33 percent to $0.6331.
The offshore Chinese yuan rose slightly to 6.9932 per dollar.
Bitcoin is rising
In the cryptocurrency market, Bitcoin rose 0.13 percent to $16,561, while Ether gained 0.26 percent to $1,192.6, although both are on track to fall more than 60 percent this year.
Oil is falling
For its part, oil prices fell on Thursday, as a rise in Corona cases in China dampened hopes of a recovery in fuel demand in the world’s second-largest oil consumer.
The scale of China’s recent outbreak and skepticism about official figures have prompted some countries to enact new travel rules for Chinese visitors, even as Beijing has come under fire from authorities there for the world’s strictest quarantine and testing regime.
Brent crude futures for February delivery were down 42 cents, or 0.5 percent, at $82.84 a barrel by 01:23 GMT, while U.S. crude was down 50 cents, or 0.6 percent, at 78.46 dollars per barrel.
Oil markets were also weighed down by expectations of another hike in US interest rates in the United States, as the Federal Reserve tries to limit price growth in a labor-starved labor market.
U.S. crude inventories fell less than expected by about 1.3 million barrels in the week ended Dec. 23, according to market sources citing figures from the American Petroleum Institute, falling short of analysts’ estimates of a decrease of 1.5 million. The US government will release its weekly data on Thursday at 10:30am EST.
Also weighing on prices, pipeline operator TC Energy said it was working to restart part of the Keystone pipeline, which authorities had to shut down after a leak this month.
However, markets received a boost from Russian President Vladimir Putin’s ban on exports of crude oil and petroleum products from February 1 for a period of five months to countries adhering to the Western price ceiling.
Germany said the embargo had “no practical significance” given Berlin’s work since spring to replace Russian oil stocks and ensure security of supply.