China considers downgrading COVID status

The media is reporting that Chinese authorities are considering downgrading Covid-19. This could be a positive for risk appetite for the day ahead in markets that have otherwise been on the back foot. 

Global stocks posted a third straight day of losses on Tuesday as investors fret over how long the Federal Reserve will maintain interest rates as so restrictive to the US economy.

However, China downgrading Covid-19 from the top class of infectious diseases would allow it to be managed more flexibly in a move that would relieve local governments of the legal obligations to introduce strong controls such as lockdowns, freeing up the economy once again. It would likely be welcomed news amongst an otherwise pessimistic outlook on the global economy and looming recessions.  MSCI’s all-country world index, a gauge of stock performance in 47 countries, dropped 1.26% to mark its third down day in a row after hitting a three-month high last week.

”While China’s emergence from almost three years of pandemic isolation is paved with uncertainty, technical charts signal Chinese stocks may enjoy some smooth gains as the economy reopens,” Bloomberg wrote.

”The incremental easing of Covid restrictions in cities from Beijing to Hangzhou has brightened the outlook for Chinese stocks, and both onshore and offshore gauges may rise toward levels reached earlier this year when optimism over an end to lockdowns and an economic recovery drove gains.”