Early Morning Call: Hang Seng jumps as Chinese cities ease Covid restrictions
The Hang Seng is the best performer as China is said to be relaxing its strict Covid rules in some areas. Europe is meanwhile set to open mixed to higher.
Equity market overview
Equity markets mostly rose overnight in the Asia-Pacific region, with the Hang Seng showing strong gains as some Chinese cities announced the easing of Covid restrictions over the weekend.
Also in China, services activity shrank to six-month lows. The Caixin/S&P Global services purchasing managers' index (PMI) fell to 46.7 from 48.4, marking the third monthly contraction in a row. Caixin/S&P's composite PMI, which includes both manufacturing and services activity, fell to 47.0 in November from 48.3 the previous month, driven by falls in both manufacturing and service sector production.
Later this afternoon at 3pm, ISM non-manufacturing PMI is also expected to fall but will remain in expansion territory. Economists forecast the index to drop to 53.1 in November, from 54.4 the previous month.
After recording its worst month (November) since September 2010, the US dollar remains on the back foot this morning as better-than-expected non-farm payrolls (NFPs) data and most recent China Covid news entice investors to look at risk-on assets. Gold and other precious metals benefit from dollar weakness. Gold is trading above $1,800.
Elsewhere on the equity markets, Foxconn should resume production in late December to early January at its Zhengzhou plant, the world's biggest iPhone factory.
According to a Reuters report last month, protests against strict Covid restrictions may have affected more than 30% of the site's November production.
Commodities
Over the weekend OPEC+ agreed to stick to its oil output targets as the oil markets struggle to assess the impact of a slowing Chinese economy on demand and a G7 price cap on Russian oil supply.
OPEC+, which comprises the OPEC nations and its allies including Russia, angered the United States and other Western nations in October when it agreed to cut output by two million barrels per day, about 2% of world demand, from November until the end of 2023.
This decision from OPEC+ came two days after the G7 agreed a price cap on Russian oil.
Meanwhile the Baker Hughes rig count in the US remained unchanged at 784, on Friday, 38% above levels a year ago at this time. Drilling rigs targeting crude oil and natural gas both stayed flat for the week, at 627 and 155 respectively, while two rigs remained classified as miscellaneous.
LB is meanwhile well on track to be the worst performing commodity in 2022. It fell below $400 per 1000 board feet for the first time since June 2020.
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