(Bloomberg) — Stocks and U.S. futures fell Monday as sentiment deteriorated due to the China Evergrande Group debt crisis and a looming Federal Reserve meeting that’s expected to hint at moving toward tapering stimulus.
Shares fell in Australia and Hong Kong, while Japan and China are among key markets closed for holidays. U.S. futures were in the red after the S&P 500 slid the most in a month, a test for the psychology of buying the dip as the gauge jabs at its 50-day moving average. The dollar advanced.
Investors are evaluating the liquidity crisis at giant developer Evergrande. Worries about its ability to make good on $300 billion of liabilities are spilling into China’s financial markets. Ping An Insurance sank on concern over its real-estate exposure, and a Hong Kong gauge of property also tumbled. The offshore yuan edged lower. Technology shares in Hong Kong struggled too.
Ten-year Treasury yields have risen ahead of the Fed meeting this week where policy makers are expected to start laying the groundwork for paring stimulus. Cash Treasuries won’t trade Monday in Asia because of the Japan holiday.
Aside from Evergrande and the prospect of reduced Fed stimulus, financial markets also face risks from uncertainty over the outlook for President Joe Biden’s $4 trillion economic agenda as well as the need to raise or suspend the U.S. debt ceiling. Investors were already fretting over a slowing global recovery from the pandemic and inflation stoked by commodity prices.
“We have inflation building in the system, wages are rising, supply chains firmly driving prices, and with so many central banks having to make rate decisions we think it’s a bit jittery,” Knights of Columbus Asset Advisors President and Chief Investment Officer, Tony Minopoli, said on Bloomberg Television.
Treasury Secretary Janet Yellen said the U.S. government will run out of money to pay its bills sometime in October without action on the debt ceiling, warning of “economic catastrophe” unless lawmakers take the necessary steps. Meanwhile, central banks in Japan and the U.K. are also handing down rate decisions this week.
Iron ore extended losses after slumping below $100 a metric ton, a plunge that helps to account for the weakness in Australian stocks as well the nation’s currency.
Here are key events to watch this week:
Canada federal election, MondayBank of Japan rate decision, WednesdayFederal Reserve rate decision, WednesdayBank of England rate decision, ThursdayFed Chair Jerome Powell, Fed Governor Michelle Bowman and Vice Chairman Richard Clarida discuss pandemic recovery, Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.4% as of 10:43 a.m. in Tokyo. The S&P 500 fell 0.9%Nasdaq 100 futures lost 0.2%. The Nasdaq 100 fell 1.2%Australia’s S&P/ASX 200 Index fell 1.2%Hong Kong’s Hang Seng Index slid 2.4%
Currencies
The Japanese yen was at 109.97 per dollarThe offshore yuan traded at 6.4790 per dollar, down 0.1%The Bloomberg Dollar Spot Index rose 0.1%The euro was at $1.1720
Bonds
The yield on 10-year Treasuries advanced two basis points to 1.36% on FridayAustralia’s 10-year bond yield rose two basis points to 1.33%
Commodities
West Texas Intermediate crude was at $71.52 a barrel, down 0.6%Gold was at $1,751.93 an ounce, down 0.1%
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