Hopes of ‘Santa Claus rally’ for US stocks fade as supercaps struggle

US stocks are battling to maintain hopes of a Santa Claus year-end rally as investor optimism about China’s reopening plan is countered by concerns about the impact of the pandemic. specific to some of the market’s largest companies.

Beijing’s decision Scrap input quarantine requirements gave a general boost to equities on Tuesday, especially in China, as investors expect the world’s second-largest economy to rebuild supply chains and already strained business relations. for nearly three years in isolation because of the pandemic.

But individual stocks, including Tesla and Apple, have been hit by concerns about disruptions to their China manufacturing operations amid a spike in the number of Covid-19 infections.

By mid-afternoon, the S&P 500 had halved its initial loss to a lower 0.3% while the tech-heavy Nasdaq Composite was down 1.2%.

In the US, the so-called Santa Claus rally represents an increase in the last five trading days of a year and the first two days of the new year.

Apple shares fell 1.9% to below $130, hitting their lowest level since June 2021.

Tesla was the second-biggest blue-chip loser in terms of percentage, down 8%. Reuters reports that in China, the electric vehicle maker is extending a reduced production schedule from this month to January.

The fall that was stolen from Tesla December losss to 42%, the worst month in at least 10 years, as investors also worry about the possibility of sales slumping and chief executive Elon Musk’s distraction from running. Twitter.

Southwest Airlines was another big drop, down 5.8 percent, as the low-cost carrier struggled with continued disruption as extreme cold hit large swaths of the United States over the holiday weekend. .

The tech industry gloom has been countered by bulls among the companies likely to benefit from China’s tourism changes, notably casino operator Wynn Resorts, which The company has a large presence in the gambling hub of Macau. It topped the list of S&P 500 winners with a 5% gain.

China’s CSI 300 index closed 1.2% higher on Tuesday. Most other markets in Asia, including Hong Kong and Australia, remained closed.

The weak performance ended a bad year for stocks, with a 19% drop in the MSCI World index throughout 2022.

“It will take a small miracle so that 2022 is not the weakest year for global equity markets since the 2008 financial crisis,” said analysts at Nordic bank SEB.

This year, global markets have been dominated by Western central banks’ battle to contain high inflation through aggressive interest rate hikes. Next year, some investors’ focus will likely shift to the impact of China’s rapid lifting of Covid-era restrictions.

“The biggest story is what is happening in China,” said Neil Shearing, chief economist at Capital Economics. He added that a longer-term impact could be on the dollar, as tensions around China have formed a key area of ​​support this year.

“In general, as risk assets rise, safe-havens like the dollar should fall,” Shearing said, warning that “however, some optimism needs to be moderated. [as] The road is going to be bumpier than many predicted.”

Elsewhere, UK markets were closed for a holiday while in Europe, the Euro Stoxx 50 index closed 0.4% higher.

Additional reporting by Patrick McGee


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