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Wall Street was preparing for a difficult start to the week on Monday.
Angela WeissAFP / Getty Images
Wall Street was heading for a tough Monday, with futures contracts for the Dow Jones Industrial Average falling more than 500 points amid a large drop in global equities, as investors worried about the implications of the Chinese Evergrande’s imminent failure.
Dow
futures were showing an open about 530 points lower, after the index fell 166 points on Friday to close at 34,585, marking three straight weeks of decline. Future for the
S&P 500
and
Nasdaq
indicated an equally small aperture.
Overseas, Hong Kong
Hang Seng Index
fell 3.3%, with the Hang Seng Properties index down 6.7%, while the pan-European index
Stoxx 600
fell 1.9%.
Investor attention is squarely focused on China, where the seemingly imminent bankruptcy of heavily indebted real estate developer Evergrande looms large.
Global sentiment has been rattled by Evergrande, who has some $ 300 billion in liabilities, including debts owed this week – as of today – that he cannot pay. The group announced on Sunday that it had started repaying some of its investors with real estate.
Read also : Evergrande has a debt owed this week that she cannot pay. Why it’s not just China’s problem.
“The risk of contagion from the collapse of Evergrande is the main cause of today’s massive sell-off. You have all kinds of banks and insurers caught in the net, but at the end of the day, I don’t see this as a moment for Lehman right now, ”said Neil Wilson, analyst at brokerage Markets.com. The bankruptcy of investment banking giant Lehman Brothers in 2008 is seen as one of the catalysts for what became the 2008-09 financial crisis.
“What we see today is how the risks are assessed gradually and then suddenly. This is certainly a major cause for concern for investors right now and it is possible that we will see further losses before the downside is finally bought, ”Wilson added.
Analysts noted that low liquidity – with markets closed in China, Japan and South Korea for the holidays – contributed to the liquidation.
Cryptocurrencies also fell, with Bitcoin slipping nearly 7% to below $ 45,000 as crypto investors caught on overflow fears.
Meanwhile, commodities fell after Chinese Premier Li Keqiang said over the weekend that the country would work to stabilize commodity prices. China has in the past released strategic reserves of metals and oil into domestic markets in an attempt to control prices.
Continuous copper futures fell 2.5%, platinum 1.7% and palladium 2.2%. International benchmark Brent crude futures fell 2% to below $ 73.90 a barrel, US oil futures down 2.3% to around $ 70.30.
Evergrande’s concerns and a commodity slump come as a major US Federal Reserve move is expected on Wednesday. The central bank’s monetary policy governing body, the Federal Open Market Committee, will meet on Tuesday and Wednesday before Fed Chairman Jerome Powell makes a statement.
Investors are keeping a close watch on the Fed for how and when the central bank will start slowing or reducing its monthly asset purchase schedule during the Covid-19 pandemic, which is adding liquidity to markets. Signs that a decline will come sooner rather than later could cause markets to falter even more.
“All the Fed will say on Wednesday, the tapering is an accommodation removal,” said Andrew Brenner, managing director of investment group NatAlliance Securities. “The Fed is between a rock and a hard place, but they wasted a window of opportunity to begin and complete the reduction and construction of a certain option.”
“It was the September correction that worried us,” Brenner said.
Here are eight actions in motion on Monday:
Evergrande
(3333.HK) fell further 10.2% in Hong Kong, hitting an 11-year low during the trading session, amid interest on bank loans due Monday and bond coupon payments slated for Thursday.
Other Chinese real estate values suffered in Hong Kong.
Sinic Holdings
(2103.HK) halted trading after plunging 87% as
Landscaping Henderson
(12.HK) fell 13%. the largest insurer in China,
Ping an
(2318.HK), down 5.8%, it is the insurance company most exposed to the real estate sector.
British insurer
Prudential
(PRU.UK) fell 8.3% on plans to raise $ 2.9 billion from a sale of shares in Hong Kong.
Shares of U.S. Covid-19 vaccine makers plummeted, as
Pfizer
(PFE) fell by 1.9%, with its German partner
BioNTech
(BNTX) down 4.8%, and
Modern
(MRNA) down 2.8%, all within the framework of pre-market trade in the United States. A Food and Drug Administration advisory group voted on Friday to reject a large rollout of booster vaccines.
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