Morning Bid: China crisis brewing

Nov 28 (Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.

Purchasing Managers’ Index (PMI) data will be the main economic driver for Asian markets this week, but the tone will be set by China’s increasingly tense political situation.

Thousands of people have taken to the streets in several cities across the country in unprecedented protests against the government’s strict Covid restrictions after a deadly apartment fire in Urumqi, in the country’s far west.

A wave of civil disobedience and clashes between protesters and police come amid growing frustration with President Xi Jinping’s signature zero-COVID policy. China has reported a record number of new COVID cases for four consecutive days.

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“Down with the Chinese Communist Party, down with Xi Jinping,” a crowd in Shanghai chanted early Sunday, according to witnesses and videos posted on social media.

It’s safe to say it doesn’t happen very often, and the world is watching carefully to see how Beijing handles the brewing crisis.

From an immediate market perspective, the Covid escalation and nationwide unrest will end any hope that China is about to reopen its economy. It doesn’t look like the restrictions will be lifted anytime soon, and growth will continue.

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Meanwhile, Wednesday’s PMI data is expected to show activity in China’s factory and service sectors contracted again in November, another sign that Beijing will maintain its loose monetary policy stance.

If so, the yuan is likely to come under renewed pressure, especially after the central bank said on Friday it would cut the amount of cash banks must hold as reserves and inject about $70 billion of liquidity into the struggling economy.

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Three key developments that could provide additional direction to markets on Monday:

– Australian Retail Sales (October)

– The Fed’s Williams speaks

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– ECB’s Lagarde speaks

Orlando, Fla. Reporting by Jamie McGeever in; Edited by Mark Porter

Our Standards: Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence and freedom from bias.

Jamie McGeever

Thomson Reuters

Jamie McGeever has been a financial journalist since 1998, reporting in Brazil, Spain, New York, London, and now again in the US. Focus on economics, central banks, policymakers, and global markets – especially FX and fixed income. Follow me on Twitter: @ReutersJamie

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