Global equities at one-month low, default fears haunt China Evergrande

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By Tom Arnold

(Reuters) – Global stocks slipped and the dollar strengthened on Monday ahead of a week full of global central bank meetings, as debt problems at real estate group China Evergrande dragged Hong Kong stocks to a low in one year.

European stocks were down 1.8%, sliding to two-month lows, energy and mining stocks collapsing as the dollar’s leap to nearly four-week highs crushed commodity prices .

The holidays in Japan, China and South Korea meant trade was thin in Asia, while politics added further uncertainty with elections in Canada and Germany ending the week.

Evergrande shares in China fell 12% after losing as much as 19% earlier to more than 11-year lows. The company’s listed units also fell, with investors worrying about the property developer’s ability to repay a small portion of its $ 305 billion debt owed on Thursday.

Evergrande’s problems have added to growing concerns about the health of China’s economy following Beijing’s recent crackdown on tech companies. The Hang Seng Index fell 3.5%, while Singapore-traded FTSE China futures fell 3%.

The largest MSCI Asia-Pacific stock index outside of Japan slipped 1.7% to its lowest level since Aug. 24, Australian stocks in their worst session in nearly seven months, s ‘collapsing 2.1%.

MSCI All Country World Index lost 0.5%, close to one-month low and down from all-time highs

earlier this month.

Jim Reid of Deutsche Bank wrote in a research note that it was confusing when the stock markets were around a few percent of their record highs as Asia’s largest dollar high-yielding company Evergrande, with liabilities of $ 300 billion, was on the brink.

“With no one who really knows how the training will be run and if there will be contagion,” said Reid.

Dow Jones futures fell 1.3% and S&P 500 futures fell 1%, after all three Wall Street indices posted weekly losses on Friday after days of turbulence. [.N]

The Fed is still expected to set the stage for a cut at its policy meeting on Tuesday and Wednesday, although the consensus is that an actual announcement will be delayed until the November or December meetings.

Yields on 10-year Treasuries were last at 1.3498%, moving away from a two-month high and the curve flattened ahead of the meeting.

The two-year yield, which rises along with traders’ expectations for higher federal funds rates, hit its highest level since August 27. [US/]

“A flatter yield curve suggests some fears that the Fed may exaggerate the eventual upward cycle,” said Tapas Strickland, director of economics at NAB.

He noted that only 2-3 FOMC members would need to change their dot plot forecast for an increase in 2022 to make it the median, given that seven of the 18 members had already announced a decision next year.

Germany’s 10-year yield, the benchmark for the eurozone, fell more than a basis point to -0.295%, remaining below the 10-week high hit on Friday after a report suggested that the European Central Bank (ECB) expects to hit its inflation target by 2025.

Isabel Schnabel, member of the ECB’s executive board, is due to deliver a speech on Monday at 11:35 GMT.

Investors were also monitoring a dozen other central bank meetings in Japan, Indonesia, Philippines, Taiwan, UK, Switzerland, Sweden, Norway, Brazil, South Africa, Turkey and in Hungary.

Norges Bank is expected to become the first central bank in the G10 to raise rates on Thursday.

High US yields and general risk aversion in the markets pushed the dollar to a four-week high against a basket of rival currencies. The US dollar index was last at 93.363 [FRX/]

It was linked to the yen at 109.88, while the euro was at a three-week low at $ 1.1710 due to uncertainty ahead of the election in Germany.

The offshore Chinese yuan hit its lowest level in three weeks, falling to 6.4698 yuan on the dollar, its lowest since August 31.

Canada heads to the polls on Monday with the race too close to be announced.

The stronger dollar kept gold and oil under pressure, with bullion stuck at $ 1,754 an ounce after hitting lows of more than five weeks. [GOL/]

Crude oil prices have also been affected by the resumption of production by energy companies in the Gulf of Mexico in the United States after consecutive hurricanes in the region halted production. [O/R]

Brent fell 0.9% to $ 74.65 a barrel, while US crude fell 1.2% to $ 71.12.

(Reporting by Tom Arnold in London, Anushka Trivedi in Bengaluru and Wayne Cole in Sydney. Editing by Jane Merriman)

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