When the International Olympic Committee met seven years ago to choose a host for the 2022 Winter Games, China’s leader, Xi Jinping, sent a short video message that helped tip the scale in a close, controversial vote.
China had limited experience with winter sports. Little snow falls in the distant hills where outdoor events would take place. Pollution was so dense at times that it was known as the “Airpocalypse.”
Mr. Xi pledged to resolve all of this, putting his personal prestige on what seemed then like an audacious bid. “We will deliver every promise we made,” he told the Olympic delegates meeting in Malaysia’s capital, Kuala Lumpur.
host of the Summer Olympics, the Games have become a showcase of the country’s achievements. Only now, it is a very different country.
China no longer needs to prove its standing on the world stage; instead, it wants to proclaim the sweeping vision of a more prosperous, more confident nation under Mr. Xi, the country’s most powerful leader since Mao Zedong. Where the government once sought to mollify its critics to make the Games a success, today it defies them.
Beijing 2022 “will not only enhance our confidence in realizing the great rejuvenation of the Chinese nation,” said Mr. Xi, who this year is poised to claim a third term at the top. It will also “show a good image of our country and demonstrate our nation’s commitment to building a community with a shared future for mankind.”
Mr. Xi’s government has brushed off criticism from human rights activists and world leaders as the bias of those — including President Biden — who would keep China down. It has implicitly warned Olympic broadcasters and sponsors not to bend to calls for protests or boycotts over the country’s political crackdown in Hong Kong or its campaign of repression in Xinjiang, the largely Muslim region in the northwest.
combat Covid and imposed stricter safety measures than those during the Summer Olympics in Tokyo last year. It has insisted on sustaining its “zero Covid” strategy, evolved from China’s first lockdown, in Wuhan two years ago, regardless of the cost to its economy and its people.
an accusation of sexual assault by the tennis player Peng Shuai, a three-time Olympian, the I.O.C. did not speak out. Instead, it helped deflect concerns about her whereabouts and safety.
staggering costs of the 2014 Winter Games in Sochi, Russia, and the white-knuckle chaos of preparations for the 2016 Summer Games in Rio de Janeiro.
blue skies. High-speed railways have slashed the trip from Beijing to the most distant venues from four hours to one.
In an area perennially short of water, China built a network of pipelines to feed a phalanx of snow-making machines to dust barren slopes in white. Officials this week even claimed the entire Games would be “fully carbon neutral.”
Christophe Dubi, executive director of the upcoming Games, said in an interview that China proved to be a partner willing and able to do whatever it took to pull off the event, regardless of the challenges.
“Organizing the Games,” Mr. Dubi said, “was easy.”
The committee has deflected questions about human rights and other controversies overshadowing the Games. While the committee’s own charter calls for “improving the promotion and respect of human rights,” officials have said that it was not for them to judge the host country’s political system.
Instead, what matters most to the committee is pulling off the Games. By selecting Beijing, the committee had alighted on a “safe choice,” said Thomas Bach, the committee’s president.
unseasonably warm weather. Sochi 2014 — intended as a valedictory of Vladimir V. Putin’s rule in Russia — cost a staggering $51 billion.
Growing wariness of organizing the quadrennial event gave China an unexpected advantage. Beijing — no one’s idea of a winter sports capital — could reuse sites from the 2008 Games, including the iconic Bird’s Nest stadium for the opening ceremony. The Water Cube, which held the swimming and diving events 14 years ago, was rebranded as the Ice Cube.
Almaty, the former capital of Kazakhstan, once a republic of the Soviet Union.
The final tally was 44 to 40 for Beijing, with one abstention. Almaty’s supporters were left to fume over a glitch in the electronic voting system that prompted a manual recount to “protect the integrity of the vote.” That Kazakhstan has plunged into political turmoil on the eve of the Games seems now, in hindsight, further validation of the choice to pick Beijing.
Xinhua, compared to 480,000 three years before.
ceremonial scepter popular in the Qing dynasty, complete with a 6,000-seat stadium at the bottom that is supposed to hold soccer matches after the Olympics.
military preparations for the Games, including the installation of 44 antiaircraft batteries around Beijing, even though the likelihood of an aerial attack on the city seemed far-fetched.
“A safe Olympics is the biggest symbol of a successful Beijing Olympic Games, and is the most important symbol of the country’s international image,” he said then.
accusation of sexual harassment rocked the sports world last fall, the committee found itself caught in the furor.
fumed in private. Without the protective cover of the international committee, they feared reprisals if they spoke out individually.
The 2008 Olympics also faced harsh criticism. A campaign led by the actress Mia Farrow called the event the “genocide games” because of China’s support for Sudan despite its brutal crackdown in the Darfur region. The traditional torch relay was hounded by protests in cities on multiple continents, including Paris, London, San Francisco and Seoul.
The accusations against China today are, arguably, even more serious. The United States and other countries have declared that China’s crackdown against the Uyghur Muslims in Xinjiang amounts to genocide. Ms. Farrow’s biting sobriquet has resurfaced for 2022, with a Twitter hashtag.
only screened spectators of its own choosing. It will mostly be a performance for Chinese and international television audiences, offering a choreographed view of the country, the one Mr. Xi’s government has of itself.
If the coronavirus can be kept under control, Beijing could weather the Olympics with fewer problems than seemed likely when it won the rights to the Games seven years ago. Mr. Xi’s government has already effectively declared it a success. A dozen other Chinese cities are already angling for the 2036 Summer Olympics.
“The world looks forward to China,” Mr. Xi said in an New Year’s address, “and China is ready.”
Chris Buckley contributed reporting. Claire Fu, Liu Yi and Li You contributed research.
WASHINGTON — Companies are bracing for another round of potentially debilitating supply chain disruptions as China, home to about a third of global manufacturing, imposes sweeping lockdowns in an attempt to keep the Omicron variant at bay.
The measures have already confined tens of millions of people to their homes in several Chinese cities and contributed to a suspension of connecting flights through Hong Kong from much of the world for the next month. At least 20 million people, or about 1.5 percent of China’s population, are in lockdown, mostly in the city of Xi’an in western China and in Henan Province in north-central China.
The country’s zero-tolerance policy has manufacturers — already on edge from spending the past two years dealing with crippling supply chain woes — worried about another round of shutdowns at Chinese factories and ports. Additional disruptions to the global supply chain would come at a particularly fraught moment for companies, which are struggling with rising prices for raw materials and shipping along with extended delivery times and worker shortages.
China used lockdowns, contact tracing and quarantines to halt the spread of the coronavirus nearly two years ago after its initial emergence in Wuhan. These tactics have been highly effective, but the extreme transmissibility of the Omicron variant poses the biggest test yet of China’s system.
Volkswagen and Toyota announced last week that they would temporarily suspend operations in Tianjin because of lockdowns.
Analysts warn that many industries could face disruptions in the flow of goods as China tries to stamp out any coronavirus infections ahead of the Winter Olympics, which will be held in Beijing next month. On Saturday, Beijing officials reported the city’s first case of the Omicron variant, prompting the authorities to lock down the infected person’s residential compound and workplace.
If extensive lockdowns become more widespread in China, their effects on supply chains could be felt across the United States. Major new disruptions could depress consumer confidence and exacerbate inflation, which is already at a 40-year high, posing challenges for the Biden administration and the Federal Reserve.
“Will the Chinese be able to control it or not I think is a really important question,” said Craig Allen, the president of the U.S.-China Business Council. “If they’re going to have to begin closing down port cities, you’re going to have additional supply chain disruptions.”
thrown the global delivery system out of whack. Transportation costs have skyrocketed, and ports and warehouses have experienced pileups of products waiting to be shipped or driven elsewhere while other parts of the supply chain are stymied by shortages.
Understand the Supply Chain Crisis
For the 2021 holiday season, customers largely circumvented those challenges by ordering early. High shipping prices began to ease after the holiday rush, and some analysts speculated that next month’s Lunar New Year, when many Chinese factories will idle, might be a moment for ports, warehouses and trucking companies to catch up on moving backlogged orders and allow global supply chains to return to normal.
But the spread of the Omicron variant is foiling hopes for a fast recovery, highlighting not only how much America depends on Chinese goods, but also how fragile the supply chain remains within the United States.
American trucking companies and warehouses, already short of workers, are losing more of their employees to sickness and quarantines. Weather disruptions are leading to empty shelves in American supermarkets. Delivery times for products shipped from Chinese factories to the West Coast of the United States are as long as ever — stretching to a record high of 113 days in early January, according to Flexport, a logistics firm. That was up from fewer than 50 days at the beginning of 2019.
The Biden administration has undertaken a series of moves to try to alleviate bottlenecks both in the United States and abroad, including devoting $17 billion to improving American ports as part of the new infrastructure law. Major U.S. ports are handling more cargo than ever before and working through their backlog of containers — in part because ports have threatened additional fees for containers that sit too long in their yards.
Yet those greater efficiencies have been undercut by continuing problems at other stages of the supply chain, including a shortage of truckers and warehouse workers to move the goods to their final destination. A push to make the Port of Los Angeles operate 24/7, which was the centerpiece of the Biden administration’s efforts to address supply chain issues this fall, has still seen few trucks showing up for overnight pickups, according to port officials, and cargo ships are still waiting for weeks outside West Coast ports for their turn for a berth to dock in.
work slowdowns and shipping delays.
“If you have four closed doors to get through and one of them opens up, that doesn’t necessarily mean quick passage,” said Phil Levy, the chief economist at Flexport. “We should not delude ourselves that if our ports become 10 percent more efficient, we’ve solved the whole problem.”
Chris Netram, the managing vice president for tax and domestic economic policy at the National Association of Manufacturers, which represents 14,000 companies, said that American businesses had seen a succession of supply chain problems since the beginning of the pandemic.
“Right now, we are at the tail end of one flavor of those challenges, the port snarls,” he said, adding that Chinese lockdowns could be “the next flavor of this.”
Manufacturers are watching carefully to see whether more factories and ports in China might be forced to shutter if Omicron spreads in the coming weeks.
Neither Xi’an nor Henan Province, the site of China’s most expansive lockdowns, has an economy heavily reliant on exports, although Xi’an does produce some semiconductors, including for Samsung and Micron Technology, as well as commercial aircraft components.
How the Supply Chain Crisis Unfolded
Card 1 of 9
The pandemic sparked the problem. The highly intricate and interconnected global supply chain is in upheaval. Much of the crisis can be traced to the outbreak of Covid-19, which triggered an economic slowdown, mass layoffs and a halt to production. Here’s what happened next:
A reduction in shipping. With fewer goods being made and fewer people with paychecks to spend at the start of the pandemic, manufacturers and shipping companies assumed that demand would drop sharply. But that proved to be a mistake, as demand for some items would surge.
Demand for protective gear spiked. In early 2020, the entire planet suddenly needed surgical masks and gowns. Most of these goods were made in China. As Chinese factories ramped up production, cargo vessels began delivering gear around the globe.
Then, a shipping container shortage. Shipping containers piled up in many parts of the world after they were emptied. The result was a shortage of containers in the one country that needed them the most: China, where factories would begin pumping out goods in record volumes
Demand for durable goods increased. The pandemic shifted Americans’ spending from eating out and attending events to office furniture, electronics and kitchen appliances – mostly purchased online. The spending was also encouraged by government stimulus programs.
Strained supply chains. Factory goods swiftly overwhelmed U.S. ports. Swelling orders further outstripped the availability of shipping containers, and the cost of shipping a container from Shanghai to Los Angeles skyrocketed tenfold.
Handel Jones, the chief executive of International Business Strategies, a chip consultancy, said the impact on Samsung and Micron would be limited, but he expressed worries about the potential for broader lockdowns in cities like Tianjin or Shanghai.
stay away from any vehicle collisions involving Olympic participants, to avoid infection.
Last year, terminal shutdowns in and around Ningbo and Shenzhen, respectively the world’s third- and fourth-largest container ports by volume, led to congestion and delays, and caused some ships to reroute to other ports.
But if the coronavirus does manage to enter a big port again, the effects could quickly be felt in the United States. “If one of the big container terminals goes into lockdown,” Mr. Huxley said, “it doesn’t take long for a big backlog to develop.”
Airfreight could also become more expensive and harder to obtain in the coming weeks as China has canceled dozens of flights to clamp down on another potential vector of infection. That could especially affect consumer electronics companies, which tend to ship high-value goods by air.
For American companies, the prospect of further supply chain troubles means there may be another scramble to secure Chinese-made products ahead of potential closures.
Lisa Williams, the chief executive of the World of EPI, a company that makes multicultural dolls, said the supply chain issues were putting pressure on companies like hers to get products on the shelves faster than ever, with retailers asking for goods for the fall to be shipped as early as May.
Dr. Williams, who was an academic specializing in logistics before she started her company, said an increase in the price of petroleum and other raw materials had pushed up the cost of the materials her company uses to make dolls, including plastic accessories, fibers for hair, fabrics for clothing and plastic for the dolls themselves. Her company has turned to far more expensive airfreight to get some shipments to the United States faster, further cutting into the firm’s margins.
“Everything is being moved up because everyone is anticipating the delay with supply chains,” she said. “So that compresses everything. It compresses the creativity, it compresses the amount of time we have to think through innovations we want to do.”
Ana Swanson reported from Washington, and Keith Bradsher from Beijing.
BISHKEK, Kyrgyzstan — The authoritarian leader of Kazakhstan said Friday that he had authorized the nation’s security forces to “fire without warning” as the government moved to bring an end to two days of chaos and violence after peaceful protests descended into scenes of anarchy.
“We hear calls from abroad for the parties to negotiate to find a peaceful solution to the problems,” President Kassym-Jomart Tokayev said in an address to the nation. “This is just nonsense.”
“What negotiations can there be with criminals and murderers,” he said. “They need to be destroyed and this will be done.”
The government said that order had been “mainly restored” across the country as Russian troops joined with the country’s security forces to quell widespread unrest.
the Russian state news agency RIA Novosti.
This is the first time in the history of the alliance that its protection clause has been invoked.
Even as Russian paratroopers from the elite 45th Guards Spetsnaz Brigade landed in Almaty, gunbattles raged in the streets late into the night, according to video from a BBC correspondent on the scene.
lifted price caps for liquefied petroleum gas, a low-carbon fuel that many Kazakhs use to power their cars. But the frustration among the people runs deep in regards to social and economic disparities.
What do the protesters want? The demands of the demonstrators have expanded in scope from lower fuel prices to a broader political liberalization by seeking to oust the autocratic forces that have ruled Kazakhstan without any substantial opposition since 1991.
Why does the unrest matter outside this region? Until now, the oil-rich country has been regarded as a pillar of political and economic stability in an unstable region. The protests are also significant for Vladimir Putin, who views Kazakhstan as part of Russia’s sphere of influence.
How has the government responded? President Kassym-Jomart Tokayev has called the protesters “a band of terrorists,” declared Kazakhstan under attack and asked the Russian-led military alliance to intervene. Officials have instituted a state of emergency and shut off internet access.
“The United States and, frankly, the world will be watching for any violations of human rights,” said Ned Price, a State Department spokesman. “We will also be watching for any actions that may lay the predicate for the seizure of Kazakh institutions.”
Meanwhile, China expressed full support for the Kazakh leader.
“You decisively took effective measures at critical moments to quickly calm the situation, which embodies your responsibility as a politician,” China’s authoritarian leader, Xi Jinping, said in a message to Mr. Tokayev, according to China’s official Xinhua News Agency.
Kazakhstan has been expanding its ties with China in recent years. The country plays a central role in Mr. Xi’s signature infrastructure program, known as “One Belt, One Road,” which aims to revive the ancient Silk Road and build up other trading routes between Asia and Europe to pump Chinese products into foreign markets.
In his message, Mr. Xi condemned any efforts to undermine Kazakhstan’s stability and peace, as well as its relationship with China. He told Mr. Tokayev that Beijing “resolutely opposes external forces deliberately creating turmoil and instigating a ‘color revolution’ in Kazakhstan,” the news agency said.
The Xinhua report did not elaborate on what Mr. Xi was referring to, but the Chinese Communist Party has often invoked the theme of foreign meddling to explain unrest, including in Hong Kong.
The protests in Kazakhstan started on Sunday with what appeared to be a genuine outpouring of public anger over an increase in fuel prices and a broader frustration over a government widely viewed as corrupt — with vast oil riches benefiting an elite few at the expense of the masses.
In a concession, the government on Thursday announced a price cap on vehicle fuel and a halt to increases in utility bills.
However, as the protests swelled, both the government and even some supporters of the protests said they had been co-opted by criminal gangs looking to exploit the situation.
Over the past two days, oil prices have risen 4 percent, partly driven by worries over Kazakhstan, a major petroleum producer. Futures in Brent crude, the international benchmark, were trading at $82.95 a barrel on Friday, close to seven-year highs that were reached in October.
Chevron, the second largest U.S. oil company, said there has been some disruption to oil production at their key Tengiz field in Kazakhstan. The issue appears to be difficulty in loading some petroleum products from the field onto rail cars.
The market is also responding to geopolitical tensions, including over Ukraine, and to production problems in Nigeria, Angola, Libya and elsewhere.
The huge destruction of public property in Kazakhstan — including the torching of Almaty’s City Hall and the burning and looting of scores of other government buildings — has been met with a strong show of force by security personnel.
The Interior Ministry said in a statement on Friday that 26 “armed criminals” had been “liquidated” and 18 security officers killed in the unrest.
Ivan Nechepurenko reported from Bishkek, Kyrgyzstan, Valerie Hopkins from Moscow, and Marc Santora from Chatel, France. Michael Crowley contributed reporting from Washington, Stanley Reed from London, and Gillian Wong from Seoul.
China reports 162 local symptomatic cases vs 158 day earlier
In Xian 150 cases for Sunday vs 155 Saturday
Xian orders non-essential vehicles off the roads, starts new mass testing
BEIJING, Dec 27 (Reuters) – China’s Xian tightened curbs on travel within the city on Monday as it started a new round of testing on the fifth day of a lockdown of its 13 million people.
Xian reported 150 new local symptomatic coronavirus cases for Sunday, a slight drop from the previous day’s 155, and officials warned that people flouting rules on travel or testing could face detention and fines.
Case numbers in Xian remain tiny compared with many clusters in other countries but officials have imposed tough curbs on travel within the city and on leaving it, in line with a government drive to immediately contain outbreaks.
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Authorities have not announced any infections with the Omicron variant among the 635 confirmed cases in Xian from Dec. 9 to Sunday. China has detected only a handful of Omicron infections among international travellers and in its south.
Nationwide, China reported 162 domestic symptomatic cases for Sunday, up from 158 a day earlier. It marks the highest count since the official daily bulletin started to classify asymptomatic carriers separately at the end of March last year.
Since last week, Xian residents have not been allowed to leave the city without permission from their employer or authorities.
From Monday, no vehicles are allowed on the roads unless they are for virus control or for people’s livelihoods and violators could face up to 10 days in police detention and 500 yuan ($78.48) fines.
The city told residents on Monday not to leave home unless they are giving samples in a new round of citywide testing. People in less risky areas would be allowed out to buy necessities if the testing is negative, the city government said.
Anyone who refuses to follow the rules during testing, including keeping a metre away from each other in queues, could also face detention and a fine, police said.
Xian has also launched a city-wide disinfection campaign, with workers spraying pathogen-killing solutions onto roads and buildings.
Dongyan Jin, a virologist at the University of Hong Kong, said the mass disinfection of outdoor air and surfaces seemed unnecessary given the low risk of people catching COVID-19 from outdoor surfaces or the air with so few people outside.
“This is shooting mosquitoes with cannon,” said Jin, though he said he believed disinfection of indoor surfaces, especially in places visit by infected people, was necessary.
Infections have also been found in two other cities in Shaanxi province – the same province as Xian – and in the Guangxi region and the provinces of Zhejiang, Guangdong and Sichuan.
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Reporting by Roxanne Liu and Gabriel Crossley; Editing by Himani Sarkar, Kenneth Maxwell and Raju Gopalakrishnan
Our Standards: The Thomson Reuters Trust Principles.
Move comes as Beijing cracks down on technology firms
JD.com shares plunge as much as 11.2%, Tencent up 4%
Tencent has no plans to sell stakes in other firms-source
BEIJING/HONG KONG, Dec 23 (Reuters) – Chinese gaming and social media company Tencent (0700.HK) will pay out a $16.4 billion dividend by distributing most of its JD.com (9618.HK) stake, weakening its ties to the e-commerce firm and raising questions about its plans for other holdings.
The move comes as Beijing leads a broad regulatory crackdown on technology firms, taking aim at their overseas growth ambitions and domestic concentration of market power.
Tencent said on Thursday it will transfer HK$127.69 billion ($16.37 billion) worth of its JD.com stake to shareholders, slashing its holding in China’s second-biggest e-commerce company to 2.3% from around 17% now and losing its spot as JD.com’s biggest shareholder to Walmart (WMT.N).
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The owner of WeChat, which first invested in JD.com in 2014, said it was the right time for the divestment, given the e-commerce firm had reached a stage where it can self-finance its growth.
Chinese regulators have this year blocked Tencent’s proposed $5.3 billion merger of the country’s top two videogame streaming sites, ordered it to end exclusive music copyright agreements and found WeChat illegally transferred user data.
The company is one of a handful of technology giants that dominate China’s internet space and which have historically prevented rivals’ links and services from being shared on their platforms.
“This seems to be a continuation of the concept of bringing down the walled gardens and increasing competition among the tech giants by weakening partnerships, exclusivity and other arrangements which weaken competitive pressures,” Mio Kato, a LightStream Research analyst who publishes on Smartkarma said of the JD.com stake transfer.
“It could have implications for things like the payments market where Tencent’s relationships with Pinduoduo and JD have helped it maintain some competitiveness with Alipay,” he said.
JD.com shares plunged 11.2% at one point in Hong Kong trade on Thursday, the biggest daily percentage decline since its debut in the city in June 2020, before closing with a 7.0.% decline. Shares of Tencent, Asia’s most valuable listed company, rose 4.2%.
Shares of Tencent and JD on Dec 23
The companies said they would continue to have a business relationship, including an ongoing strategic partnership agreement, though Tencent Executive Director and President Martin Lau will step down from JD.com’s board immediately.
Eligible Tencent shareholders will be entitled to one share of JD.com for every 21 shares they hold.
A Tencent logo is seen in Beijing, China September 4, 2020. REUTERS/Tingshu Wang
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PORTFOLIO DIVESTMENTS?
The JD.com stake is part of Tencent’s portfolio of listed investments valued at $185 billion as of Sept. 30, including stakes in e-commerce company Pinduoduo (PDD.O), food delivery firm Meituan (3690.HK), video platform Kuaishou (1024.HK), automaker Tesla (TSLA.O) and streaming service Spotify (SPOT.N).
Alex Au, managing director at Hong Kong-based hedge fund manager Alphalex Capital Management, said the JD.com sale made both business and political sense.
“There might be other divestments on their way as Tencent heeds the antitrust call while shareholders ask to own those interests in minority stakes themselves,” he said.
A person with knowledge of the matter told Reuters Tencent has no plans to exit its other investments. When asked about Pinduoduo and Meituan, the person said they are not as well-developed as JD.com.
The Chinese internet giant has also invested in overseas companies such as Tesla (TSLA.O), Netamble, Snapchat, Spotify (SPOT.N) and Sea (SE.N). “Going abroad is one of Tencent’s most important strategies in the future,” a CITIC Securities research note said on Thursday. “The possibility of selling overseas high-quality technology and internet assets is small.”
Tencent chose to distribute the JD shares as a dividend rather than sell them on the market in an attempt to avoid a steep fall in JD.com’s share price as well as a high tax bill, the person added.
Kenny Ng, an analyst at Everbright Sun Hung Kai, said the decision was “definitely negative” for JD.com.
“Although Tencent’s reduction of JD’s holdings may not have much impact on JD’s actual business, when the shares are transferred from Tencent to Tencent’s shareholders, the chances of Tencent’s shareholders selling JD’s shares as dividends will increase,” he said.
Technology investor Prosus (PRX.AS), which is Tencent’s largest shareholder with a 29% stake and is controlled by Naspers of South Africa, will receive the biggest portion of JD.com shares.
Walmart owns a 9.3% stake in JD.com, according to the Chinese company. Payments processor Alipay is part of Tencent rival Alibaba Group .
($1 = 7.7996 Hong Kong dollars)
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Reporting by Sophie Yu in Beijing and Scott Murdoch in Hong Kong; Additional reporting by Xie Yu, Selena Li, Donny Kwok and Eduardo Baptista in Hong Kong and Nikhil Kurian Nainan in Bengaluru; Writing by Jamie Freed; Editing by Subhranshu Sahu and Muralikumar Anantharaman
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The floor of the New York Stock Exchange (NYSE) is seen after the close of trading in New York, U.S., March 18, 2020. REUTERS/Lucas Jackson
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NEW YORK, Nov 26 (Reuters) – COVID-19 has resurfaced as a worry for investors and a potential driver of big market moves after a new variant triggered alarm, long after the threat had receded in Wall Street’s eyes.
Worries about a new strain of the virus, named Omicron and classified by the World Health Organization as a variant of concern, slammed markets worldwide and dealt the S&P 500 index its biggest one-day percentage loss in nine months. The moves came a day after the U.S. Thanksgiving holiday when thin volume likely exacerbated the moves.
With little known about the new variant, longer term implications for U.S. assets were unclear. At least, investors said signs that the new strain is spreading and questions over its resistance to vaccines could weigh on the so-called reopening trade that has lifted markets at various times this year.
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The new strain may also complicate the outlook for how aggressively the Federal Reserve normalizes monetary policy to fight inflation.
“Markets were celebrating the end of the pandemic. Slam. It isn’t over,” said David Kotok, chairman and chief investment officer at Cumberland Advisors. “All policy issues, meaning monetary policy, business trajectories, GDP growth estimates, leisure and hospitality recovery, the list goes on, are on hold.”
The S&P 500 fell by a third as pandemic fears mushroomed in early 2020, but has more than doubled in value since then, though the pandemic’s ebb and flow has driven sometimes-violent rotations in the types of stocks investors favor. The index is up more than 22% this year.
Before Friday, broader vaccine availability and advances in treatments made markets potentially less sensitive to COVID-19. The virus had dropped to a distant fifth in a list of so-called “tail risks” to the market in a recent survey of fund managers by BofA Global Research, with inflation and central bank hikes taking the top spots.
On Friday, however, technology and growth stocks that had prospered during last year’s so-called stay-at-home trade soared, including Zoom Communications (ZM.O), Netflix Inc (NFLX.O) and Peloton (PTON.O).
At the same time, stocks that had rallied this year on bets of economic reopening may suffer if virus fears grow. Energy, financials and other economically sensitive stocks tumbled on Friday, as did those of many travel-related companies such as airlines and hotels.
The new Omicron coronavirus variant spread further around the world on Sunday, with 13 cases found in the Netherlands and two each in Denmark and Australia, even as more countries tried to seal themselves off by imposing travel restrictions.
First discovered in South Africa, the new variant has now also been detected in Britain, Germany, Italy, the Netherlands, Denmark, Belgium, Botswana, Israel, Australia and Hong Kong. read more
Friday’s swings also sent the Cboe Volatility Index (.VIX), known as Wall Street’s fear gauge, soaring and options investors scrambling to hedge their portfolios against further market swings. read more
Reuters Graphics
Andrew Thrasher, portfolio manager for The Financial Enhancement Group, had been concerned that recent gains in a handful of technology stocks with large weightings in the S&P 500, including Apple Inc (AAPL.O), Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O), were masking weakness in the broader market.
“This set the kindling for sellers to push markets lower and the latest COVID news appears to have stoked that bearish flame,” he said.
Some investors said the latest COVID-19 related weakness could be a chance to buy stocks at comparatively lower levels, expecting the market to continue rapidly recovering from dips, a pattern that has marked its march to record highs this year.
“We’ve had numerous days when economic optimism collapses. Each of these optimism collapses were a good buying opportunity,” wrote Bill Smead, founder of Smead Capital Management, in a note to investors. Among the stocks he recommended were Occidental Petroleum (OXY.N) and Macerich Co (MAC.N), down 7.2% and 5.2% respectively on Friday.
One of several wild cards is whether virus-driven economic uncertainty will slow the Federal Reserve’s plans to normalize monetary policy, just as it has started unwinding its $120 billion a month bond buying program.
Futures on the U.S. federal funds rate, which track short-term interest rate expectations, on Friday showed investors rolling back their view of a sooner-than-expected rate increase.
Investors will be watching Fed Chair Jerome Powell and U.S. Treasury Secretary Janet Yellen’s appearance before Congress to discuss the government’s COVID response on Nov. 30 as well as U.S. employment numbers, due out next Friday.
Investors held out hope that markets could stabilize. Jack Ablin, chief investment officer at Cresset Capital Management, said moves may have been exaggerated by lack of liquidity on Friday, with many participants out for the Thanksgiving holiday.
“My first reaction is anything we are going to see today is overdone,” Ablin said.
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Reporting by Saqib Iqbal Ahmed; Additional reporting by Chuck Mikolajczak, Megan Davies and Lewis Krauskopf; Writing by Ira Iosebashvili; Editing by Megan Davies, Richard Chang and Alexander Smith
Our Standards: The Thomson Reuters Trust Principles.
European shares on track for worst sell-off in a year
Companies benefiting from economic reopening tumble in early U.S. trading
Crude prices tumble
WASHINGTON/LONDON, Nov 26 (Reuters) – Shares tumbled on Wall Street on Friday as they reopened after Thanksgiving, while European stocks saw their biggest sell-off in 17 months and oil prices plunged by $10 per barrel as fears over a new coronavirus variant sent investors scurrying to safe-haven assets.
The World Health Organization (WHO) on Friday designated a new COVID-19 variant detected in South Africa with a large number of mutations as being “of concern,” the fifth variant to be given the designation. read more
Unofficially, the Dow Jones Industrial Average (.DJI) closed down 2.53% at 34,899.34 in its largest percentage drop in more than a year. The S&P 500 (.SPX) lost 2.27%, its worst one-day drop since Feb. 25, and the Nasdaq Composite (.IXIC) dropped 2.23%, the biggest one-day route in two months.
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U.S. markets closed early on Friday after being shut all day on Thursday for the Thanksgiving holiday.
The benchmark STOXX 600 index (.STOXX) ended 3.7% lower on the day, leaving it down 4.5% for the week. The volatility gauge (.V2TX) for the main stock market hit its highest in nearly 10 months.
Companies that had benefited from an easing of COVID-related restrictions this year, including AMC Entertainment (AMC.N), plane engine maker Rolls Royce (RR.L), easyJet (EZJ.L), United Airlines (UAL.O) and Carnival Corp (CCL.N) all fell.
Retailers dropped as Black Friday, the start of the holiday shopping season, kicked off as the new variant fuelled concerns about low store traffic and inventory issues. read more
In Europe, the travel and leisure index (.SXTP) plummeted 8.8% in its worst day since the COVID-19 shock sell-off in March 2020.
“Bottom line is this is showing that COVID is still the investor narrative, a lot of today’s movement is driven by the South African variant,” said Greg Bassuk, chief executive officer of AXS Investments in Port Chester, New York.
“We have been talking about four or five factors that have been driving the last couple of months’ activity – inflation fears, some economic data, Fed policy – but what we have seen over the last year is that big developments with respect to COVID really have ended up eclipsing some of those other factors by a substantial degree and that is what is driving today’s market activity.”
Little is known of the variant detected in South Africa, Botswana and Hong Kong, but scientists said it has an unusual combination of mutations and may be able to evade immune responses or make the virus more transmissible.
Britain said the new variant was the most significant variant to date and was one of several countries to impose travel restrictions on southern Africa. read more
A U.S. one dollar banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration
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The European Commission also said it wanted to consider suspending travel from countries where the new variant has been identified, though the WHO cautioned against hastily imposing such restrictions. read more
Global shares (.MIWD00000PUS) fell 1.81%, their biggest down day in more than a year. France’s CAC 40 (.FCHI) shed 4.8%. The UK’s FTSE 100 (.FTSE) dropped 3.6%, while Germany’s DAX (.GDAXI) fell 4.2% and Spain’s IBEX (.IBEX) lost 5.0%.
Malaysian rubber glove maker Supermax (SUPM.KL), which soared 1500% during the first wave of the pandemic, leapt 15%.
MSCI’s index of Asian shares outside Japan (.MIAPJ0000PUS) dropped 2.44%, its sharpest fall since late July.
In commodities, oil prices plunged. Gold prices reversed earlier gains seen amid the move away from riskier assets.
U.S. crude was last down 12%, at $69.02 per barrel by 1:21 p.m. EST (1812 GMT). Brent crude dropped 10.5% to $73.59.
Spot gold prices were down 0.09%.
As investors dashed for safe-haven assets, the Japanese yen strengthened 1.87% versus the greenback, while sterling was last trading at $1.3331, up 0.08% on the day.
The dollar index fell 0.757%, with the euro up 1% to $1.1318.
U.S. Treasury debt yields posted their sharpest drop since the pandemic began. Treasuries benchmark 10-year notes last rose to yield 1.4867%. The 2-year note last rose to yield 0.4941%, from 0.644%.
“A flight to safety is underway with the 10-year U.S. Treasury yield down,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “The proximate cause of the sell-off is yesterday’s announcement of a new COVID-19 variant in South Africa, which investors fear could weigh on economic growth.”
The market swings come against a backdrop of already growing concern about COVID-19 outbreaks driving restrictions on movement and activity in Europe and beyond. read more
Markets had previously been upbeat about the strength of economic recovery, despite growing inflation fears.
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Reporting by Chris Prentice; Editing by Susan Fenton
Our Standards: The Thomson Reuters Trust Principles.
The world reacted with alarm on Friday to the highly mutated new coronavirus variant discovered in southern Africa, as the United States, the European Union and nations across the globe imposed new travel restrictions, financial markets swooned and visions of finally emerging from the pandemic started to dim.
Just two days after the world learned of the variant, the World Health Organization officially labeled it a “variant of concern,” its most serious category — the first since the Delta variant, which emerged a year ago. The designation means that the variant has mutations that might make it more contagious or more virulent, or make vaccines and other preventive measures less effective — though none of those effects has yet been established.
suffered terribly when Covid first hit Europe early last year.
On Friday, Israel, Singapore, several European nations individually, and then the European Union as a whole, the United States and Canada followed the lead set by Britain on Thursday night, temporarily barring foreign travelers who have recently been in South Africa or any of several neighboring countries. As with past travel bans, countries are allowing their own citizens and permanent residents to return home if they test negative for the virus, with some requiring additional testing and quarantine after arrival.
fights over vaccines and social restrictions have grown increasingly harsh.
world’s highest case rates for their populations are all European — several of them about six times as high as the U.S. rate.
South Africa, whose last coronavirus wave peaked in July, has recently reported case rates far below the worldwide average. But last week the rate more than doubled from the week before.
Reporting was contributed by Sheryl Gay Stolberg, Zolan Kanno-Youngs, Carl Zimmer, Lynsey Chutel and Nick Cumming-Bruce.
In the town of Parys, South Africa, on Friday. South Africans faced travel restrictions in several countries over growing fears about the new variant.Credit…Kim Ludbrook/EPA, via Shutterstock
An increasing number of countries — including Britain, France, Israel, Italy and Singapore — were moving on Friday to restrict travel from South Africa and other countries in the region, a day after South African authorities identified a concerning new coronavirus variant with mutations that one scientist said marked a “big jump in evolution.”
In the past, governments have taken days, weeks or months to issue travel restrictions in response to new variants. This time, restrictions came within hours of South Africa’s announcement — and hours before health officials from the country were scheduled to discuss the variant with the World Health Organization.
Britain, France and Israel announced bans on flights from South Africa and several neighboring countries on Thursday, citing the threat of the new variant. Britain’s flight ban applies to six countries — South Africa, Botswana, Eswatini, Lesotho, Namibia and Zimbabwe — and begins at noon local time on Friday.
“More data is needed but we’re taking precautions now,” Sajid Javid, the British health secretary, said on Twitter.
“While no cases have been detected so far on French territory, the principle of maximum precaution must apply,” Jean Castex, France’s prime minister, said in a statement, adding that anyone in France who had recently traveled to those countries should get tested and identify themselves to the authorities.
The governments of Croatia, Italy, Malta, the Netherlands, Japan and Singapore announced on Friday that they would impose similar restrictions. Markets were down in Japan in response to the variant’s discovery, and officials in Australia and in New Zealand said that they were monitoring it closely.
“Our scientists are at work to study the new B.1.1.529 variant,” Italy’s health minister, Roberto Speranza, said in a statement, using the variant’s scientific name. “Meanwhile we err on the side of caution.”
Ursula von der Leyen, the president of the European Union’s executive arm, also said in a Twitter post on Friday morning that it would propose restricting air travel to European countries from southern Africa because of concerns about the variant.
The @EU_Commission will propose, in close coordination with Member States, to activate the emergency brake to stop air travel from the southern African region due to the variant of concern B.1.1.529.
— Ursula von der Leyen (@vonderleyen) November 26, 2021
In the past two days, scientists detected the variant after observing an increase in infections in South Africa’s economic hub surrounding Johannesburg. So far only a few dozen cases have been identified in South Africa, Hong Kong, Israel and Botswana.
A number of variants have emerged since the onset of the pandemic. One underlying concern about them is whether they will stymie the fight against the virus or limit the effectiveness of vaccines. South African scientists will meet with the World Health Organization technical team on Friday to discuss the new variant, and the authorities will assign it a letter of the Greek alphabet.
In a statement posted on Friday on a government website, South Africa said it would urge Britain to reconsider its travel restrictions, saying: “The U.K.’s decision to temporarily ban South Africans from entering the U.K. seems to have been rushed, as even the World Health Organization is yet to advise on the next steps.”
In December last year, South Africa was the first nation to report the appearance of the Beta variant, which has now spread to nearly 70 countries. Scientists have been concerned that some clinical trials have shown that vaccines offer less protection against the Beta variant. Since then, the more virulent and aggressive Delta variant has spread all over the world and is believed to be fueling the latest surge in cases.
With over 1,200 new infections, South Africa’s daily infection rate is much lower than that in Germany, where new cases are driving a wave. However, the density of mutations on this new variant raises fears that it could be highly contagious, leading scientists to sound the alarm early.
“This variant did surprise us — it has a big jump in evolution, many more mutations than we expected, especially after a very severe third wave of Delta,” said Tulio de Oliveira, director of the KwaZulu-Natal Research and Innovation Sequencing Platform.
Emma Bubola, John Yoon and Aurelien Breeden contributed reporting.
— Mike Ives, Lynsey Chutel and Andrés R. Martínez
More than 40 percent of adults in South Africa have received at least one dose of the Covid-19 vaccination.Credit…Themba Hadebe/Associated Press
Scientists are still unclear on how effective vaccines will be against the new variant flagged by a team in South Africa, which displays mutations that might resist neutralization. Only several dozen cases have been fully identified so far in South Africa, Botswana, Hong Kong and Israel.
The new variant, B.1.1.529, has a “very unusual constellation of mutations,” with more than 30 in the spike protein alone, according to Tulio de Oliveira, director of the KwaZulu-Natal Research and Innovation Sequencing Platform.
On the ACE2 receptor — the protein that helps to create an entry point for the coronavirus to infect human cells — the new variant has 10 mutations. In comparison, the Beta variant has three and the Delta variant two, Mr. de Oliveira said.
The variant shares similarities with the Lambda and Beta variants, which are associated with an innate evasion of immunity, said Richard Lessells, an infectious diseases specialist at the KwaZulu-Natal Research and Innovation Sequencing Platform.
“All these things are what give us some concern that this variant might have not just enhanced transmissibility, so spread more efficiently, but might also be able to get around parts of the immune system and the protection we have in our immune system,” Dr. Lessells said.
The new variant has largely been detected among young people, the cohort that also has the lowest vaccination rate in South Africa. Just over a quarter of those ages between 18 and 34 in South Africa are vaccinated, said Dr. Joe Phaahla, the country’s minister of health.
While cases of the variant are mainly concentrated in the country’s economic hub, particularly in the country’s administrative capital, Pretoria, it is “only a matter of time” before the virus spreads across the country as schools close and families prepare to travel for the holiday season, Dr. Phaahla said.
— Carl Zimmer
Pedestrians wearing face masks in Hong Kong.Credit…Jerome Favre/EPA, via Shutterstock
The Hong Kong government said on Thursday that it had detected two cases of a new variant identified in South Africa, which scientists have warned shows a “big jump in evolution” and could limit the effectiveness of vaccines.
The infections were detected in a man who had returned to Hong Kong from South Africa this month, and later in another man staying across the hall in the same quarantine hotel. (Hong Kong requires almost all overseas arrivals to quarantine in hotels for two to three weeks.) The virus’s genetic sequence was identical in both men, suggesting airborne transmission, according to the city’s Center for Health Protection. Both men were vaccinated.
Further sequencing by the University of Hong Kong confirmed that the viruses belonged to the new variant from South Africa, officials said, though they acknowledged that information about the variant’s public health impact was “lacking at the moment.”
Some Hong Kong experts have questioned the length and efficacy of Hong Kong’s quarantines, noting that officials have recorded several cases of residents in quarantine hotels apparently infecting people who were staying in other rooms.
In the case of the latest variant infections, the government has blamed the first man for not wearing a surgical mask when opening his hotel room door, as well as “unsatisfactory air flow” in the hotel. As of Friday afternoon there had been no reports of infections in nearby rooms.
The presence of the new variant may complicate efforts to reopen the border between Hong Kong and mainland China. For months, Hong Kong officials have said that resuming quarantine-free travel between the Chinese territory and the mainland — virtually the only places in the world still pursuing a containment strategy that seeks full eradication of the virus — is their top priority, even though the strategy has damaged the city’s reputation as a global finance hub.
Mainland officials have said that Hong Kong is not doing enough to control the virus, even though the city has recorded just two locally transmitted cases in the last six months. The mainland has recently faced new domestic outbreaks; on Thursday, the National Health Commission there reported four new local cases.
On Thursday evening, Hong Kong’s No. 2 official, John Lee, said mainland officials had told him earlier in the day that Hong Kong had “basically fulfilled” the conditions to reopen the border. He said details would still need to be worked out, including the introduction of a mainland-style “health code” app that has raised privacy concerns.
Asked by a reporter whether the new variant would delay reopening with the mainland, Mr. Lee said only that the Hong Kong authorities would “ensure that adequate research and tracking are done in this regard.”
“Of course, we must manage and control any new risks,” he said.
— Vivian Wang
The Christmas market in Bremen, Germany, on Thursday. With cases and deaths rising, many such markets have been canceled.Credit…Focke Strangmann/EPA, via Shutterstock
Nearly 20 months after pandemic lockdowns first began, governments across Europe are beginning to tighten restrictions again amid the latest wave of new coronavirus cases, threatening the gains that the region has made against the pandemic.
France is racing to offer booster shots to all adults and will not renew health passes for those who refuse. Deaths are rising in Germany, with its 68 percent vaccination rate, a worrying trend for a highly inoculated country. Austria has been in a nationwide lockdown since Monday, and made vaccinations mandatory.
In Eastern Europe, where far-right and populist groups have fueled vaccine skepticism, vaccination rates are lower than the rest of the continent. Bulgaria, where a quarter of the population is fully vaccinated, is turning back to shutdowns or other restrictive measures.
The quickly deteriorating situation in Europe is worrisome for the United States, where seven-day average of new cases has risen 24 percent in the past two weeks. (The number of new deaths reported in the United States is down 6 percent.) Trends in new cases in the United States have tended to follow Europe by a few weeks.
“Time and again, we’ve seen how the infection dynamics in Europe are mirrored here several weeks later,” Carissa F. Etienne, director of the Pan American Health Organization, told reporters on Wednesday. “The future is unfolding before us, and it must be a wake-up call for our region because we are even more vulnerable.”
The White House insists that while new infections are on the rise, the United States can avoid European-style lockdowns.
“We are not headed in that direction,” Jeff Zients, the White House coronavirus response coordinator, said this week. “We have the tools to accelerate the path out of this pandemic: widely available vaccinations, booster shots, kids’ shots, therapeutics.”
But the chief of the World Health Organization, Tedros Adhanom Ghebreyesus, said that some countries had lapsed into a “false sense of security.”
He issued a warning during a news briefing on Wednesday: “While Europe is again the epicenter of the pandemic, no country or region is out of the woods.”
Before Zhang Gaoli was engulfed in accusations that he had sexually assaulted a tennis champion, he seemed to embody the qualities that the Chinese Communist Party prizes in officials: austere, disciplined, and impeccably loyal to the leader of the day.
He had climbed steadily from running an oil refinery to a succession of leadership posts along China’s fast-growing coast, avoiding the scandals and controversy that felled other, flashily ambitious politicians. He became known, if for anything, for his monotone impersonality. On entering China’s top leadership, he invited people to search for anything amiss in his behavior.
“Stern, low-key, taciturn,” summed up one of the few profiles of him in the Chinese media. His interests, Xinhua news agency said, included books, chess and tennis.
Now the allegation from Peng Shuai, the professional tennis player, has cast Mr. Zhang’s private life under a blaze of international attention, making him a symbol of a political system that prizes secrecy and control over open accountability. The allegation raises questions about how far Chinese officials carry their declared ideals of clean-living integrity into their heavily guarded homes.
entrusted with overseeing China’s initial preparations for the 2022 Winter Olympics, which is now being overshadowed by the furor.
About three years ago, after stepping down, Mr. Zhang called the head of a tennis academy to summon Ms. Peng to play tennis with him at a party-owned hotel in Beijing, called the Kangming, that plays host to retired officials, according to her post.
Later that day, she said, he forced her to have sex in his home. They resumed a relationship, but he insisted it remain furtive. She had to switch cars to be able to enter the government compound where he lives in Beijing, she wrote. He warned her to tell no one, not even her mother.
With rarely a word or hair out of place, Mr. Zhang has seemed an unlikely protagonist for a scandal that has rippled around the world. He belongs to a generation of officials who rose after the upheavals of the Cultural Revolution, taking on the self-effacing ethos of collective leadership under Hu Jintao, who preceded the country’s current leader, Xi Jinping.
faltered under debt and inflated expectations, but Mr. Zhang moved upward into the central leadership in 2012. He became executive vice premier: in effect, China’s deputy prime minister.
“I hope that all the party members, officials and members of the public in this city will continue to exercise strict oversight over me,” Mr. Zhang said in 2012 as he left Tianjin for Beijing.
negotiated oil deals with Russia’s president, Vladimir V. Putin, and promoted Mr. Xi’s Belt and Road Initiative.
met with Thomas Bach, the president of the International Olympic Committee, as Mr. Bach was visiting the city.
It was Mr. Bach who on Sunday held a video call with Ms. Peng intended to reassure athletes and others worried about her disappearance in the days after her post appeared.
Earlier in Mr. Xi’s term, lurid reports about officials’ sexual misdeeds at times surfaced in state media, disclosures intended to signal that he was serious about purifying the party.
Mr. Xi’s priority now appears to be fending off any odor of scandal tainting the party’s top echelons. References to Ms. Peng’s account were nearly wiped off the internet inside China. A Chinese foreign ministry spokesman, Zhao Lijian, suggested that the attention around Ms. Peng had become “malicious hype.” Official media have not shown or reported on Mr. Zhang since Ms. Peng went public; nor have they directly challenged her account.
“Even to deny her allegations would be to give them a level of credence that you couldn’t then roll back,” said Louisa Lim, a former journalist who long worked in China and the author of “The People’s Republic of Amnesia.”
When Mr. Zhang retired in 2018, he dropped from public view, as is the norm in Chinese politics. Retirement often comes with perks like high quality health care, housing and travel within China, but also some monitoring.
“Once you retire, your movements are reported to the party’s department of organization,” said Minxin Pei, a professor of government at Claremont McKenna College in California who studies the party.
In her post, Ms. Peng seemed to indicate that she and Mr. Zhang had recently had a disagreement, and that he had once again “disappeared” as he did before. She wrote, though, that she expected that her account would have little effect on Mr. Zhang’s eminence.
“With your intelligence and wits,” she wrote, “I am sure you will either deny it, or blame it on me, or you could simply play it cool.”
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