A sharp contraction in Chinese services activity for March offered a glimpse of how the latest coronavirus outbreaks-driven lockdowns across the nation are impacting the economic performance.

Read: China's Caixin Services PMI unexpectedly slumps to 42.0 in March

But there seems to be little relief, as the daily count of new covid infections continues to hit records. China reported the biggest one-day increase on record at 20,472 new infections while the city of Shanghai recorded over 17,000 new covid cases.  

Against this backdrop, the authorities in Shanghai city came out with fresh guidelines, citing that they will start another city-wide round of mass covid testing from April 6.

Lockdown curbs on the city will remain until the testing is complete, they added.  

Additional takeaways

On Tuesday, Chinese authorities extended a COVID-19 lockdown in Shanghai to cover all of the financial centre's 26 million people, despite growing anger over quarantine rules in the city, per Reuters.

Market reaction

Risk aversion remains at full steam in Asia, as investors worry about the aggressive Fed’s tightening and its potential impact on the economy alongside the looming risks from the Russia-Ukraine crisis.

The covid resurgence in China also remains a cause for concern ahead of the critical Fed March meeting’s minutes.

China’s Shanghai Composite Index is down 0.80% on the day while the AUD/USD pair faces a double whammy, meandering in lows near 0.7560, as of writing.

Note that markets in mainland China reopened after two days of public holidays.