Stocks attempt rebound from Evergrande-led sell-off
SINGAPORE/LONDON: World stocks stabilised on Tuesday and oil prices recovered from the previous day’s heavy selling, as investors grew more confident that contagion from the distress of debt-saddled Chinese developer Evergrande would be limited.
The STOXX index of Europe’s biggest shares rose 0.6 per cent while Wall Street futures rebounded 1 per cent after the S&P 500 and Nasdaq suffered their biggest daily percentage drops since May on Monday. German and US government bonds, in heavy demand amid the stock market sell-off of Monday, saw yields slip 2-3 basis points respectively.
Investors pointed to the broadly positive market backdrop with central bank money-printing and the recovery in the world economy post-pandemic as reasons to stay bullish.
“Accommodative monetary and fiscal policies and macro recovery are still suggesting a buy-the-dip strategy’’, said Angelo Meda, head of equities at Banor SIM in Milan.
Some caution still lingered however, given the simmering worries over the spillover from an Evergrande debt default, as well as a raft of central bank meetings including Wednesday’s Federal Reserve statement that may bring the bank a step closer to tapering.
MSCI’S index of world stocks was flat, having plunged 1.6% on Monday. S&P 500 futures were almost 1 per cent higher but the index stands around 4% below record highs hit in earlyseptember
Asian shares sold off earlier on Tuesday with Hong Kong’s Hang Seng down 0.1 per cent by late afternoon, while Japan’s Nikkei returned from a market holiday with a drop of 2 per cent.
China’s yuan steadied in offshore trade, recouping a little of the losses that sent it to a threeweek low on Monday. Evergrande shares fell 4% as focus now shifts to Thursday when the company is due to make bond interest payments.
An all-staff letter from chairman Hui Ka Yuan promised the firm would fulfil its responsibilities and “walk out of its darkest moment”.
Struggling for cash, the developer owes $305 billion and markets worry a messy failure could reverberate through China’s property sector and everything exposed to it — primarily banks and then the broader economy.
While Chinese mainland markets are closed for a public holiday, there was little evidence of that yet. Major Chinese state media made no mention of Evergrande’s troubles.