World shares sink as virus, war trump strong China data

World share prices have fallen, with Hong Kong down almost 6% and Shanghai sinking 5% as virus lockdowns and rising numbers of COVID cases in China threaten to disrupt manufacturing and trade.

The sell-off gathered pace late in the session despite the release of data showing strong increases in Chinese retail sales, industrial production and investment in January-February. It followed a decision by China’s central bank not to ease interest rates to spur economic growth.

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Prices of oil and other commodities slid as Russian forces pounded the Ukraine capital ahead of another round of talks between the two sides.

Germany’s DAX lost 2.3% to 13,612.44 and the CAC 40 in Paris was also 2.3% lower at 6,223.67. Britain’s FTSE 100 declined 1.5% to 7,088.89.

The futures for the S&P 500 and Dow industrials were down 0.7%.

Anxiety over the war in Ukraine and an upcoming Federal Reserve meeting on interest rates is keeping markets on edge.

Uncertainty about whether persistently high inflation might stifle the global recovery from the pandemic has caused gyrations in prices for oil, wheat and other commodities produced in the region, bringing day-to-day and hour-to-hour reversals across markets.

Markets appear to have been trafficking in an odd mix of hope, fear and uncertainty, Mizuho Bank said in a commentary.

Shares in Hong Kong have sunk to near six-year lows after the neighbouring city of Shenzhen was ordered into a shutdown to combat China’s worst COVID-19 outbreak in two years.

The Hang Seng index lost 5.7% to 18,415.08 after wobbling more than 6% lower. The Shanghai Composite gave up 5% to 3,063.97.

Fears continue to dog stock markets that lockdowns could spread, which would severely impact China’s growth,” Jeffrey Halley of Oanda said in a commentary.

Tokyo’s Nikkei 225 rose 0.2% to 25,346.48, while the Kospi in Seoul gave up 0.9% to 2,621.53. Australia’s S&P/ASX 200 slid 0.7% to 7,097.40 and shares also fell in Taiwan and Bangkok.

Oil prices have tumbled this week, taking some pressure off the inflation sweeping the globe, with a barrel of U.S. Crude falling below $100 per barrel after touching $130 last week.

U.S. Crude shed $5.60 to $97.41 per barrel in electronic trading on the New York Mercantile Exchange. It tumbled $6.32 to $103.01 on Monday.

Brent crude, the standard for pricing international oils, gave up $5.94 to $100.96 per barrel.

In other developments, the London Metal Exchange said trading in nickel will resume Wednesday, just over a week after it was suspended when the price of the metal skyrocketed to over $100,000 per ton.

The announcement followed a notice from Tsingshan Holding Group, a Chinese metals giant, that it had struck a deal with its creditors on a standstill arrangement such that the banks would not make margin calls or close out their positions against it while the company is resolving its nickel margin and settlement requirements.

Russia is the world’s No. 3 producer of nickel. It’s price and that of many other commodities has surged on speculation over possible disruptions to supplies as Russia contends with widening economic sanctions following its invasion of Ukraine.

Investors were already uneasy before the war began because central banks around the world are preparing to shut off the stimulus they pumped into the global economy after the pandemic struck.

The Federal Reserve is expected to raise its key short-term interest rate by a quarter of a percentage point on Wednesday in the first such increase since 2018, pulling the federal funds rate off its record low of nearly zero.

The challenge is to raise rates just quickly and high enough to bat down inflation without overdoing it and causing a recession.

On Monday, the S&P 500 gave up an early gain and closed 0.7% lower while the Dow Jones Industrial Average was essentially unchanged. The Nasdaq fell 2% and the Russell 2000 index slid 1.9%.

In currency dealings, the dollar fell to 117.95 Japanese yen from 118.18 yen late Monday. The euro rose to $1.1006 from $1.0941.