China fear spreads beyond Evergrande, roiling markets
At 24,099 points, Hong Kong’s broader Hang Seng index closed at its lowest level since Oct ’20
The global stock rout sparked by investor angst over China’s realestate sector and Federal Reserve tapering worsened on Monday, with US stocks falling more than 1 per cent and European equities tumbling the most in more than two months.
The S&P 500 fell the most on an intraday basis since May, a test for the buy-the-dip mentality as the gauge jabs at its 50-day moving average. The benchmark index is still up around 16 per cent this year. Treasuries gained along with the dollar before Wednesday’s Fed meeting, where policy makers are expected to start laying the groundwork for paring stimulus.
Angst about the world’s most-indebted developer is spreading as senior Chinese policy makers stay silent on whether the government will step in to prevent a messy collapse. It has sparked the biggest sell-off in Hong Kong property stocks in more than a year and dragged down everything.
Interest payments on two Evergrande bonds come due Thursday, a key test of whether the company will continue meeting obligations to debt holders even as it falls behind on payments to banks, suppliers and holders of onshore investment products in China. “While the Evergrande situation is front and center, the reality is, stock market valuations are overstretched and the market has enjoyed too long of a break from volatility,” said David Bahnsen, chief investment officer at Newport Beach. The Stoxx Europe 600 index dropped more than 2 per cent to a two-month low and was on track at one point for the biggest decline since October 2020. Raw materials led the broad-based retreat as iron ore extended a slump below $100 a ton and base metals declined after China stepped up restrictions on industrial activity. Germany’s DAX underperformed as a rebalancing takes effect.
At 24,099 points, Hong Kong’s broader Hang Seng index closed at its lowest level since October 2020. Meanwhile, emergingmarket stocks headed for their biggest drop in a month, while Russia’s ruble and Chile’s peso led developing-nation currency declines. Bitcoin briefly fell below $43,000. WTI crude oil extended a drop toward $70 a barrel.
Wall Street's main indexes tumbled, as concerns about the pace of a global recovery hit economy-linked stocks at the start of a week in which the Federal Reserve will decide on potentially tapering its pandemicera stimulus. Ten of the 11 major S&P sectors declined in early trading.
The Dow Jones lost 500 points in early trade and is set for its biggest one day drop since July 19. The blue-chip Dow pared back some of the losses soon after the open when it dropped nearly 600 points. The S&P 500 fell 1.5 per cent. The Nasdaq Composite dropped 1.8 per cent.
Treasury prices rallied, pushing yields on the benchmark 10-year note down 6 basis points to 1.306 per cent at one point, before shedding some price gains to trade at 1.3226 per cent.