Traders work on the floor of the New York Stock Exchange (NYSE) on April 28, 2022 in New York City.
Major European indexes dropped in early trading. They followed stocks in Asia, which sold off as China’s pledge to stick to its zero-Covid policy stoked concerns about the world’s second biggest economy.
Hong Kong’s Hang Seng Index (HSI) tumbled 3.8%, leading losses in Asian markets and logging its worst daily drop in more than a month. Tech stocks saw a sharp sell-off, with the Hang Seng Tech Index down 5.2%.
Mainland China’s benchmark Shanghai Composite Index (SHCOMP) and its tech-heavy peer Shenzhen Component Index both slid more than 2%. Japan’s Nikkei (N225) opened lower, but reversed losses later in the day. It ended up 0.7%.

In currency markets, the Chinese yuan declined against the US dollar, hitting its lowest level in one and a half years. It pared some losses in the afternoon to stand at 6.71 per US dollar.

In Europe, London’s FTSE 100 (UKX)index fell more than 1%. Germany’s DAX (DAX)and France’s CAC 40 (CAC40) dropped 1.4% and 1.6%, respectively. The pound, which lost 2% against the dollar Thursday after the Bank of England predicted a hard landing for the UK economy, slipped to $1.23.

The losses came after the Dow dropped more than 1,100 points and the S&P 500 fell 3.7% Thursday, wiping out Wednesday’s gains as investors worried about the impact of rising US interest rates and the risk of a recession.

Investors in Asia are also jittery after the latest comments from China’s top leadership on its efforts to stop the spread of coronavirus.

President Xi Jinping said all levels of government must “resolutely” adhere to the country’s zero-Covid policy. He made the remarks during a meeting Thursday with the Communist Party’s Politburo Standing Committee — the nation’s top decision-making body.

Officials at all levels of government should “resolutely fight with any words and acts distorting, doubting and denying China’s Covid control policy,” Xi said.

“That may serve to dampen some hopes of any Covid-19 policy shift, which suggests that economic recovery will remain prolonged and uneven,” wrote Yeap Jun Rong, a market strategist at financial services firm IG Group, on Friday.

China’s zero-Covid policy has taken a heavy toll on the country’s economy. In April, the gigantic services sector contracted at the second sharpest pace on record as Covid lockdowns hit businesses hard. China’s manufacturing sector also shrank last month, sending the economy backward.

— Nicole Goodkind contributed to this report.

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