Equities fall, oil pares losses with 2023, China reopening in focus

NEW YORK, Dec 28 (Reuters) - Equity indexes edged lower

on Wednesday while oil prices tumbled as investors trudged

toward 2023 weighing hopes for a potential economic boost from

China's lifting COVID-19 restrictions against concerns about

rising infections there. The yield on the benchmark U.S. 10-year Treasury turned

higher after falling earlier, following its biggest one-day jump

in just over two months on Tuesday. In currencies, the dollar pared some gains after hitting a

one-week high against the yen and it regained some ground

against sterling after earlier falling sharply. MSCI's broadest index of global stocks was

down 0.54% as investors stayed on the sidelines at the end of a

brutal year for equities. The global index is on course to end

2022 down about 20%, in its biggest percentage decline since

2008 during the financial crisis. China's government had announced on Monday that they would

end requirements for inbound travellers to quarantine on Jan. 8.

The country's health system has come under heavy stress since

lifting restrictions. But strategists at JP Morgan forecast a

"likely infection peak" during the Lunar New Year holiday next

month, followed by a "cyclical upturn." Thomas Hayes, chairman at Great Hill Capital LLC in New

York, expects reopening of the world's second largest economy to

ultimately benefit the U.S. economy even if the current uptick

in infections is raising concerns. "The speed at which they have reversed their stance has

caught people off guard. People are sceptical because the last

two years have been such a debacle in China," said Hayes. But Amit Sinha, head of multi-asset strategy at Voya

Investment Management, said Tuesday's stock declines are the

result of "noise" including low liquidity and so-called tax loss

harvesting where investors sell money-losing investments. "Today there's nibbling away at risk and selling for tax

loss harvesting purposes," said Sinha. "Markets have been going

down for the course of December. There's a negative sentiment

and momentum already." And with uncertainty about 2023 abounding due to questions

such as when the U.S. Federal Reserve can cut interest rates and

whether it can control inflation without damaging the economy,

Sinha sees "reasons why people want to sell." "There's no compelling reason to be on the other side. It

exaggerates the price decline," he said. The Dow Jones Industrial Average fell 167.43 points,

or 0.5%, to 33,074.13, the S&P 500 lost 24.18 points, or

0.63%, to 3,805.07 and the Nasdaq Composite dropped

93.23 points, or 0.9%, to 10,260.00. In Treasuries, benchmark 10-year notes were up

2.7 basis points to 3.885%, from 3.858% late on Tuesday. The

30-year bond was last up 3.1 basis points to yield

3.9738%, from 3.943%. The 2-year note was last down

0.9 basis points to yield 4.3594%, from 4.368%. "If the 10-year gets to 4%, the floodgates are going to

open, there will be a lot of buying at that level," said Jay

Sommariva, managing partner and chief of asset management at

Fort Pitt Capital Group in Pittsburgh. In foreign exchange markets, the dollar index rose

0.202%, with the euro down 0.17% to $1.062. The Japanese yen weakened 0.64% versus the greenback at

134.34 per dollar, while Sterling was last trading at

$1.2028, up 0.06% on the day. Oil prices regained some lost ground by settlement as

traders weighed COVID news from China. U.S. crude settled down 0.07% at $78.96 per barrel

while Brent finished at $83.26, down 1.27% on the day. Gold prices dropped about 1% earlier in the session as

higher Treasury yields weighed and after the precious metal

reached a six-month peak on Tuesday. Spot gold dropped 0.5% to $1,805.39 an ounce. U.S.

gold futures fell 0.55% to $1,808.80 an ounce. (Reporting by Sinéad Carew, Chuck Mikolajczak, Ankur Banerjee,

Naomi Rovnick; Additional reporting by Ankika Biswas; Editing by

Tomasz Janowski, Alison Williams and Josie Kao)