China’s Reopening Raises Questions after Abolishment of Covid Stats Publication

U.S. equities are on track to suffer their steepest annual decline since the financial crisis in 2008, with only 3 trading days remaining to complete the lackluster 2022. The S&P 500 slumped as trading volumes fell about 20% below the 30-day average. Meanwhile, annual price growth in the US declined to single digits in October — the first time since November 2020. The S&P CoreLogic Case Shiller national home price index rose by 9.2% in October, but fell from 10.7% in September.

Commoditywise, Russia has responded to the G7's attempt to cap gains from its oil revenues, with a new decree signed by Russian President Putin. The motion, taking effect between Feb. 1 and July 1, will ban contracts that "directly or indirectly'' comply with the $60 price ceiling. Meanwhile, counterintuitively, WTI crude futures edged further down over the last 24 hours at $78.95 per barrel, while Brent crude continues to hover around $83.50/bbl. The bigger story appears to be the full reopening of China and how that oil demand will impact the global economy (see below).

In Europe, as of 3:15 p.m. CET, the Stoxx 600 resurfaced in the green by adding 0.31% after today morning’s losses. At the time of writing, the British FTSE is edging higher by 0.81%, however, German stocks slid by 0.14%, while France’s CAC 40 remained virtually unchanged. Of the macro publications in focus, Spain launched €10 bn aid against inflation (the package includes a one-time bonus of €200 to about 4.2 mn households with an annual income of up to €27,000), while the UK posted surprise retail sales growth (retailers, however, are expecting sales to return to a decline of -17 in January).

In Asia, as China reopens its borders, some nations are considering fresh restrictions. A surge in cases across China has raised eyebrows, especially after Beijing said it would no longer report daily data on infections and deaths. Chinese hospitals and funeral homes are also under intense pressure from the scale of the current outbreak as a zero-Covid policy that was in place for nearly three years comes to an abrupt end.

Meanwhile, BoJ policymakers discussed a quite non-conventional approach that higher salaries could stop the potential risk of returning deflationary pressures. “Price rises are accelerating not just for goods but for services – there's a chance Japan’s inflationary momentum is heightening,” a member was quoted as saying in the central bank’s summary of opinions. There are market expectations that the BoJ could wind down its dovish Governor, Haruhiko Kuroda's massive stimulus when he retires in Apri.