All eyes on China’s Covid control press conference at 0700 GMT

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The risk mood is faring better today with Chinese equities roaring ahead of the press conference later. The Shanghai Composite is up over 2% and Hang Seng up by 4% currently, underscoring the positive sentiment. So, what can we expect from Chinese authorities later today?

The press conference will be one on Covid prevention and control measures. The backdrop of protests across the country over the weekend is obviously a main factor to consider. With that in mind, the government said that it will invite experts from the NHC and CDC to “introduce the implementation of prevention and control measures to effectively handle the pandemic”.

Whether or not that means a clear signal to pivot away from its zero-Covid policy remains to be seen but for now, markets have certainly gotten their hopes up. So, the baseline has been set as we head into the key risk event.

There have also been some developments in the past day that has led to the hopeful optimism:

• China reported a decline in new infections for the day before (28 November), 38,645 cases vs the record high of 40,347 cases in the prior day, marking the first drop since 19 November
• Former Global Times editor and mouthpiece for the Chinese government, Hu Xijin, offered a series of tweets that restrictions will be eased and that “public sentiment will soon calm down”

As such, if China doesn’t really deliver as what markets are anticipating, that could see a knee-jerk reaction that sides more with a risk-off move as we get into European trading i.e. stocks will see early gains fade while the dollar may pare some losses across the board.