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Wall Street started Monday with its biggest losses in months amid a broad decline in global stocks . Investors worried about the impact and financial contagion of the potential failure of Chinese real estate group Evergrande. An upcoming US Federal Reserve policy meeting, the Washington budget and debt ceiling, and inflated equity valuations all contributed to a sense of uncertainty in the markets.
The
Dow Jones industry average
was down about 500 points, or 1.4%, in Monday morning trading after falling 166 points on Friday – marking three straight weeks of declines. the
S&P 500
was down 1.6% on Monday and the
Nasdaq composite
2.1% lost. For the Dow and S&P this was the largest one-day decline since July and the Nasdaq the largest loss since May.
Overseas, Hong Kong
Hang Seng Index
declined 3.3% with the Hang Seng Properties Index declining 6.7%. The pan-European
Stoxx 600
decreased by 1.9%. Germany
DAX
10 new members added, including
puma
(Ticker: PUM.Germany) and
Porsche
(PAH3.Germany) on Monday to a total of 40. The index lost 2.5%.
« Markets have been valued perfectly for a long time and in this September lull, which seems to be quite seasonal throughout history, the markets have doing what they hate most – uncertainty, ”wrote David Bahnsen, chief investment officer at The Bahnsen Group. on Monday. « There is uncertainty about geopolitics, public health, tax and spending laws, and that uncertainty is greater when stocks are trading for 25x earnings than 20x earnings. »
Investors’ attention turned on Monday all over China, where the apparently imminent collapse of a heavily indebted property developer
China Evergrande Group
(3333. Hong Kong) stood out great.
The global mood was shaken by the Evergrande situation. The real estate giant has approximately $ 300 billion in debt – more than 6% of China’s total real estate sector – including debt due this week that it cannot repay with cash. The group said on Sunday it has started repaying some of its investors with real estate.
« Risk of contagion from the Evergrande meltdown is the main driver behind today’s sell-off. They’ve caught all kinds of banking and insurance online, but ultimately I don’t see this as a Lehman moment right now, ”said Neil Wilson, an analyst at broker Markets.com. The bankruptcy of investment banking giant Lehman Brothers in 2008 is seen as one of the catalysts of the 2008-09 financial crisis.
“What we are seeing today is how risk is graded gradually and then suddenly. This is definitely a major source of investor concern right now and it is possible that we will see further losses before the dip is finally bought, ”added Wilson.
Evergrande stock is up more than in 2021 Down 80%, and their dollar-denominated bonds recently traded below 30 cents a dollar. Analysts noted that low liquidity – with markets in mainland China, Japan and South Korea closed for public holidays – contributed to the wider sell-off on Monday.
« While the impact of Evergrande’s liquidity crisis is huge, the good one is News that the impact has not yet spilled over into other markets, ”LPL Chief Market Strategist Ryan Detrick wrote on Monday. “The short-term finance markets in China have been functioning well so far; Remember, it was the US money markets that cracked the system for the first time in early 2008, long before the wheels fell off. «
Cryptocurrencies also fell on Monday, with Bitcoin up more than 7.5% slipped below $ 44,000 as crypto investors were gripped by fears of spillover.
Regardless, commodities fell after Chinese Premier Li Keqiang said over the weekend that the country would work to stabilize commodity prices. China has historically released strategic reserves of metals and oil in domestic markets to tame prices.
Continuous contract futures on copper fell 2.6%, platinum lost 2% and palladium lost 4%. The international benchmark crude oil futures of the Brent variety fell 1.1% to $ 75.50 a barrel, while the US oil futures fell 1.5% to around $ 70.90.
Meanwhile, stands announced an important decision by the US Federal Reserve on Wednesday. The central bank’s monetary policy-making body, the Federal Reserve’s Open Markets Committee, will meet on Tuesday and Wednesday before Fed chairman Jerome Powell makes a statement. Officials will also update their projections of future interest rates and inflation.
Investors are watching the Fed closely for clues as to how and when the central bank will begin its program of monthly asset purchases from the Covid-19 19 pandemic, which add liquidity to the markets. Signs that a taper is coming sooner rather than later could shake markets even more.
« Whatever the Fed says on Wednesday, tapering is a reduction in adjustments, » said Andrew Brenner, CEO of the NatAlliance Securities investment group. « The Fed is between a rock and a hard place, but they wasted a window of time to start and stop tapering and build some optionality. »
Evergrande
Hong Kong fell another 10.2%, hitting an 11-year low during the trading session as bank loan rates were due on Monday and bond coupon payments due Thursday.
Other Chinese property stocks suffered in Hong Kong.
Sinic stocks
(2103rd Hong Kong) stopped trading after falling 87% during
Henderson land development
(12th Hong Kong) was down 13.2%. China’s largest insurer,
Ping an
(2318th Hong Kong) fell 5.8% – the insurance company most heavily involved in the real estate sector.
Stocks of the US Covid-19 vaccine maker traded above average.
Pfizer
(PFE) made up a previous loss with its German partner and rose by 1.3%
BioNTech
(BNTX) by 3.1% and
Modern
(MRNA) decreased by 0.5%. An advisory body to the Food and Drug Administration voted on Friday to oppose a widespread introduction of vaccine booster vaccinations. Pfizer said Monday morning that its vaccine was safe and effective in children ages 5-11.
Regardless, it is said that the US will allow vaccinated travelers from the European Union and the UK to enter the country from November.
Wall Street started on Monday with the biggest losses in months in the midst of a broad decline in global stocks.
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