Stocks fall as investors weigh debt ceiling, Evergrande

Tesla shares rose 2% after the automaker announced record third quarter deliveries. Merck climbed 3.4%, suggesting an extension of Friday’s gains in a second session, after the drug company said its antiviral pill was effective against Covid-19 in an advanced stage trial. Vaccine makers fell, Moderna down 7.6% and Novavax down 4%.

Investors are watching negotiations in Congress closely, as lawmakers debate the debt ceiling ahead of a deadline this month to raise it so the government can pay its bills. Meanwhile, Democrats are considering slashing the next spending package to improve its chances of passing. The Biden administration is also set to unveil its Chinese trade policy following a review of import tariffs.

“You have a combination of the uncertainty of DC, big headlines in China on Evergrande and in a context where you have seen bond yields rise,” said David Stubbs, global head of investment strategy at JP Morgan Private Bank . “All of this should ultimately be manageable, but that’s the problem of political uncertainty, especially with regard to the world’s two largest economies.”

Shares of China Evergrande and its property management unit ceased trading in Hong Kong on Monday. The subsidiary said this was pending an announcement on a possible takeover bid.

Another Chinese developer, Hopson Development, has also suspended its shares. He said this was pending an announcement regarding a transaction involving a Hong Kong-listed, anonymous target company.

“While this may provide shorter-term funding, the markets will always question the company’s long-term image,” said Kiran Ganesh, multi-asset strategist at UBS Asset Management. Evergrande carries over $ 300 billion in liabilities that investors believe are unlikely to pay.

The yield on the benchmark 10-year Treasury bond climbed to 1.479% on Monday, from 1.464% on Friday.

Global benchmark Brent wobbled, falling 0.4% before rising 0.8% to trade to $ 79.90, as investors waited for a meeting of OPEC members on Monday. Some traders are considering the possibility of a larger increase in production, which would weigh on oil prices, analysts at Rystad Energy said.

Overseas, the pan-continental Stoxx Europe 600 grew by 0.1%. Volvo Cars has said it is planning an initial public offering and expects to list its Class B shares on the Nasdaq stock exchange in Stockholm. Morrisons shares fell 3.7% after a bidding war between private equity firms to acquire the UK supermarket chain ended without a significantly higher-than-expected bid.

In Asia, most of the major benchmarks fell. Hong Kong’s Hang Seng index fell 2.2%, while Japan’s Nikkei 225 index fell 1.1%. Mainland Chinese markets are closed until Friday for the Golden Week holidays.

Write to Anna Hirtenstein at [email protected]