Chinese shares fell on Friday after two days of searing gains following supportive policy announcements from Beijing, with the threat of increased Covid disruption and lockdowns weighing on markets.

Hong Kong’s benchmark Hang Seng index was down 2.4 per cent, while the CSI 300 index of Shanghai- and Shenzhen-listed stocks was off almost 1 per cent.

While Chinese markets appeared less choppy than at the start of the week, when panic over economic growth and geopolitical tensions drove two days of intense falls, analysts warned that volatility could return.

“Market sentiment is fragile and there could still be volatility ahead,” said Bruce Pang, head of research at China Renaissance. Pang said that only when negative factors in China — including renewed Covid lockdowns, regulatory crackdowns and geopolitical tensions — start fading can “investors’ sentiment and confidence be regathered and solidified”.

Equities elsewhere in Asia were mixed, as Japan’s benchmark Topix edged up 0.3 per cent and Australia’s S&P/ASX 200 rose 0.4 per cent. South Korea’s Kospi was flat.

The muted moves for most Asia-Pacific markets suggested upward momentum was fading after a solid close on Wall Street, where the S&P 500 ended Thursday’s session up 1.2 per cent at the highest level in a month and the tech-focused Nasdaq Composite gained 1.3 per cent.

Futures markets indicated European shares would open lower, with the Euro Stoxx 50 set to fall 0.5 per cent, while the S&P 500 was expected to shed 0.6 per cent after US secretary of state Antony Blinken poured cold water on expectations of a diplomatic resolution to the war between Ukraine and Russia.

“The actions that we’re seeing Russia take every single day, virtually every minute of every day, are in total contrast to any serious diplomatic effort to end the war,” Blinken said.

In commodities markets, oil prices rose as investors weighed the impact of tighter monetary policy.

Brent crude, the international benchmark, rose 2.4 per cent on Friday to $109.18 a barrel, while US marker West Texas Intermediate climbed 2.7 per cent to $105.73.

Both benchmarks closed more than 8 per cent higher on Thursday following a warning from the International Energy Agency, which said a fall in Russian crude supply to the global market threatened to become the “biggest supply crisis in decades”.

Unhedged — Markets, finance and strong opinion

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