- Global stocks fell on Monday as Dow futures fell 500 points as concerns grew over the impending default of Chinese property developer Evergrande.
- Hong Kong-listed shares of Evergrande plunged to their lowest level in 11 years as fears grew of a $ 300 billion debt default.
- Oil fell as the dollar climbed to a three-week high and US production gradually returned.
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U.S. equity futures slid alongside equities elsewhere on Monday, as concerns over the escalating crisis at Chinese real estate developer Evergrande caused shares of Chinese and Hong Kong real estate companies to drop to their lowest in one. half a decade.
Investors are also taking a stand ahead of the Federal Reserve’s meeting this week, which is expected to shed light on the central bank’s timetable to cut back on regular bond purchases.
In the United States, Dow Jones stock futures were down about 540 points for a decline of 1.7%, as of 6:30 a.m. ET. Those of the S&P 500 fell 1.3% and the Nasdaq lost 1.1%, suggesting a lower start to trading later in the day.
With mainland Chinese markets closed for a holiday, the impact of concerns over Evergrande has been felt in Hong Kong. The Hang Seng Properties index, which tracks a dozen real estate developers, fell 6.64% to a 52-week low, while the larger Hang Seng index was 3.87% lower. But exchanges were meager, as Japan and South Korea were also on vacation alongside China.
Evergrande faces a over $ 300 billion debt tightening. Concerns center on the impact on China’s financial system if the country’s second-largest real estate developer defaults on its obligations to banks and bondholders, and if its demise, if not averted by Beijing action , could trigger contagion.
The company is due $ 83.5 million in interest on September 23 and another $ 47.5 million interest payment on September 29 on two bond installments. Both bonds would default if interest is not paid within 30 days of the scheduled payment date. But the payment is unlikely to be made, Deutsche Bank strategists say.
Evergrande’s Hong Kong-listed shares fell 18.9% on Monday to an 11-year low. Ping An Insurance, China’s largest insurer by market value and the most exposed to the real estate sector, closed down 5%.
Investors are also bracing for the Fed’s monetary policy decision, expected after its two-day meeting on Wednesday. It is the main event among 16 central banks, including the UK and Japan, which are due to hold meetings this week.
US economists at Deutsche Bank expect Fed Chairman Jerome Powell to reiterate that a reduction in the pace of asset purchases is appropriate this year, as long as economic progress remains on track. But given the big jobs missed in August and other mixed data released after his latest comments, investors are watching specific details on the pace and timing.
On Thursday, the United States, Eurozone, United Kingdom and other countries will receive flash reads on purchasing manager indices for September, watched for signs of improvement from the deterioration in July.
European markets opened lower, also dragged down by concerns from Evergrande. Official Destatis Monday’s data showed German producer prices for August were up 12% from a year ago, the biggest annual gain in 45 years.
The Frankfurt DAX lost 2.2% and the Euro Stoxx 50 lost 2.1%. London’s FTSE 100 fell 1.6%.
Oil futures extended losses from the previous week as the dollar index jumped 0.2% to a three-week high of 93.39. Oil is facing headwinds from the return of US production to the Gulf of Mexico, previously shut off by the impacts of hurricanes, according to Carsten Fritsch, commodities analyst at Commerzbank.
Brent crude fell 1.6% to $ 74.14 a barrel, and West Texas Intermediate slipped 1.9% to $ 70.57 a barrel.