BANGKOK (AP) – European shares and United States (US) futures rose yesterday after a lacklustre day in Asia, where shares fell in Hong Kong and Shanghai after troubled Chinese property developer Evergrande warned it may run out of money.
Moving to reassure investors and keep growth from stalling, China’s central bank cut the amount of funds banks are required to keep in reserve. That freed up CNY1.2 trillion (USD190 billion) for banks to lend.
Investors are meanwhile also struggling with uncertainty about the newest coronavirus variant and about when the Federal Reserve will cut off its support for markets.
“This is a week that will force uncomfortable contemplation about ‘known unknowns’ mainly associated with Omicron, Fed tightening and China (regulatory/property) risks,” Mizuho Bank said in a commentary.
That will bring still more uncertainty after a tumultuous spell last week, it said.
Germany’s DAX surged 0.9 per cent to 15,298.76 while the CAC 40 in Paris climbed 0.8 per cent to 6,820.83. Britain’s FTSE 100 picked up 0.8 per cent to 7,181.36. The future for the Dow industrials was 0.8 per cent higher, while the contract for the S&P 500 gained 0.6 per cent.
Chinese regulators scrambled to reassure investors after Evergrande, one of China’s biggest developers, said it may run out of money to “perform its financial obligations” as it struggles to comply with pressure to reduce its USD310 billion in debt.
The worry is that unsustainable levels of debt in the property sector might trigger a financial crisis. China wants to avoid a bailout but also is unlikely to let the situation deteriorate to the point where problems would cascade to that level.
A number of real estate companies have run into trouble as the government has pushed to reduce debt levels, but officials have issued statements saying China’s financial system is strong and default rates are low. Most developers are financially healthy and Beijing will keep lending markets functioning, the most recent statements said.
Evergrande’s Hong Kong-traded shares plunged 19.6 per cent yesterday, helping pull the Hang Seng index 1.8 per cent lower, to 23,349.38. The Shanghai Composite index gave up early gains, losing 0.5 per cent to 3,589.31.
India’s benchmark dropped 1.7 per cent and Taiwan’s also edged lower. Thai markets were closed for a public holiday.
In Tokyo, the Nikkei 225 gave up 0.4 per cent to 27,927.37. But the S&P/ASX 500 in Sydney ended slightly higher, gaining 0.1 per cent to 7,245.10. In Seoul, the Kospi edged 0.2 per cent higher to 2,973.25.
Last week’s volatile swings on Wall Street ended on Friday with more losses for stocks, as a mixed batch of US job market data triggered another bout of dizzying trading.
The S&P 500 closed 0.8 per cent lower, at 4,538.43. The Dow lost 0.2 per cent to 34,580.08. The Nasdaq sank 1.9 per cent to 15,085.47, while the Russell 2000 slumped 2.1 per cent to 2,159.31.
Last Friday’s jobs report, which is usually the most anticipated economic data by Wall Street each month, showed employers added only 210,000 jobs last month.
Economists were expecting much stronger hiring of 530,000, and it raised worries the economy may stagnate while inflation remains high. That’s a worse-case scenario called “stagflation” by economists, and the Omicron variant’s arrival makes its likelihood more uncertain.
In other trading yesterday, US benchmark crude oil advanced USD2.00 to USD68.26 per barrel in electronic trading on the New York Mercantile Exchange. It shed 24 cents to USD66.26 last Friday.
Brent crude, the standard for pricing international oils, picked up USD1.85 to USD71.73 per barrel.
The US dollar rose to JPY113.26 from JPY112.92. The euro weakened to USD1.1297 from USD1.1309.