Stocks finish mixed as China says it will open borders

Investors are hoping the reopening of borders by the world’s second-largest economy will support global growth.

US stock indexes were mixed after China said it would open its borders next month. Picture: Michael M. Santiago/Getty Images/AFP

US stock indexes finished mixed after China said it would open its borders next month, bolstering investors’ hopes that the thawing of the world’s second-largest economy will support global growth. Bond yields climbed.

The S&P 500 fell 15.57 points, or 0.4 per cent, to close at 3829.25 Tuesday, the week’s first trading session after the holiday. The tech-focused Nasdaq Composite slid 144.64 points, or 1.4 per cent, to 10353.23, while the Dow Jones Industrial Average added 0.1 per cent, or 37.63 points, to close at 33241.56.

China has maintained some of the world’s most-restrictive coronavirus lockdown measures, slowing its economy significantly. Plans to lift Covid-19 quarantine requirements on international arrivals early in January could boost China’s economy as travel resumes.

This could support the global economy at a time when many nations have lifted interest rates in an effort to tame inflation. The Federal Reserve has signalled plans to raise rates through the spring.

Still, Covid-19 is spreading rapidly in China as the country reopens, prompting reports of overcrowded hospitals and inundated crematoriums. Investors are weighing the impacts of the outbreak with what the reopening will mean for the global economy over the longer term.

“China has really gone full force into abandoning zero Covid and there are going to be some growing pains with that effort,” said Michael Reynolds, vice president of investment strategy at Glenmede. “The explosion in case counts there is probably going to be economically disruptive to the downside for them.”

Tesla, which this weekend extended a shutdown of its Shanghai manufacturing plant amid the outbreak, was among the S&P 500’s worst performers Tuesday. Tesla shares tumbled $14.04, or 11 per cent, to $US109.10 ($A161.99), extending a losing streak to seven trading days. The electric-vehicle maker’s shares are off more than 40 per cent in December.

Disruptions related to the virus’s spread in China pose a risk to US companies, said Louis Navellier, chief investment officer of money-management firm Navellier & Associates.

“Companies with heavy China exposure have a cloud over them for the moment,” said Mr. Navellier.

In US bond markets, the yield on the benchmark 10-year Treasury note rose to 3.857 per cent, from 3.746 per cent Friday. Yields and prices move inversely.

A wave of flight cancellations sent Southwest Airlines’ shares tumbling. The airline’s stock fell $US2.15, or 6 per cent, to $US33.94 as it cancelled nearly two-thirds of its flights Tuesday and said a reduced schedule would continue for days. The airline cancelled about 8,000 flights from Thursday to Monday amid winter storms, according to data from FlightAware.

In energy markets, Brent crude, the international benchmark for oil prices, rose 41 cents, or 0.5 per cent, to $US84.33 a barrel, as Russia banned the supply of Russian oil and oil products to countries that impose a price cap. Oil has traded higher in five of the last six sessions.

In Europe, the pan-continental Stoxx Europe 600 added 0.1 per cent. Markets in the U.K. were closed.

Stock indexes in Asia rose, with the Shanghai Composite Index up 1 per cent. Hong Kong’s market was closed for a public holiday on Tuesday.

“China is front and centre for markets right now,” said Hani Redha, a portfolio manager at PineBridge Investments. “Without this, it was pretty clear to us we’d get a pretty broad global recession. Now, with China moving in the opposite direction, you can dampen that.”