Global stocks collapse as fears of Evergrande in China trigger risk By Reuters

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© Reuters. FILE PHOTO: A man looks at a chart showing stock prices outside a brokerage house in Tokyo, Japan January 6, 2020. REUTERS / Kim Kyung-Hoon

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By Lewis Krauskopf and Tom Arnold

Reuters

MSCI’s stock gauge across the world fell 1.63%, its biggest single-day percentage drop in about two months, as the Wall Street benchmark slumped 1.7 % and that the tech-rich Nasdaq fell 2.2%.

Investors have moved into safe havens, with US Treasuries gaining in price, pushing yields lower and gold rising.

Shares of Evergrande, which are struggling to raise funds to pay off its many lenders, suppliers and investors, closed 10.2% lower at HK $ 2.28.

Regulators have warned that its $ 305 billion in liabilities could trigger greater risks for China’s financial system if its debts are not stabilized.

“It started with the problems with real estate company China Evergrande and I think it just became contagion,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“Everyone was a little scared of September for this very reason,” Tuz said. “It looks like this is the month that… you have massive sales and go.”

On Wall Street, the index lost 614.41 points, or 1.78%, to 33,970.47, the S&P 500 lost 75.26 points, or 1.70%, to 4,357.73 and the 330 , 07 points, or 2.19%, at 14,713.90.

Economically sensitive sectors, notably financial services and energy, were particularly affected. Still, stocks cut losses late, with US indices ending above their session lows.

The pan-European index lost 1.67% as mining stocks slipped.

Monday’s sale saw a cumulative value of $ 2.2 trillion wiped out of global equity market capitalization from a record $ 97 trillion reached on September 6, according to data from Refinitiv.

Chart: China CDS – https://fingfx.thomsonreuters.com/gfx/mkt/jnpweyarzpw/cds.PNG

Concerns over Evergrande come as the equity rally came to a halt recently, with investors focusing on the impact of coronavirus cases on the economy and when central banks ease monetary stimulus.

The US Federal Reserve is due to meet on Tuesday and Wednesday as investors consider when it will start cutting its bond purchases.

Investors were also monitoring other central bank meetings covering Brazil, Britain, Hungary, Indonesia, Japan, Norway, Philippines, South Africa, Sweden, Switzerland, Taiwan and Turkey.

In currency trading, the euro rose 0.02%, the euro up 0.01% to $ 1.1726.

Offshore weakened against the US dollar to its lowest level in nearly a month.

The benchmark 10-year notes last rose 16/32 to yield 1.3158%, down from 1.37% on Friday night.

The iShares exchange-traded fund replicating high-yield corporate bonds lost 0.4%.

stood at 2.3% at $ 70.29 a barrel and at $ 73.92, down 1.9% on the day.

added 0.6% to $ 1,764.30 an ounce, falling from a one-month low.


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