World shares tumble as China Evergrande contagion fears rise
(Reuters) – World stocks tumbled on Monday and the dollar firmed as troubles at property group China Evergrande sparked concerns about spillover risks to the economy, creating a fresh investor worry ahead of a busy week of central bank meetings.
MSCI’s gauge of stocks across the globe dropped 1.44%, on pace for its biggest one-day fall in two months, as Wall Street’s major indexes slid more than 1% in early trade.
Investors moved into safe havens, with U.S. Treasury yields gaining in price, pulling down yields, and gold rising.
Shares in Evergrande, which has been scrambling to raise funds to pay its many lenders, suppliers and investors, closed down 10.2% at HK$2.28. Regulators have warned that its $305 billion of liabilities could spark broader risks to China’s financial system if its debts are not stabilized.
Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago, said the concern was that trouble at Evergrande could be “China’s ‘Lehman moment’”, when the collapse of a U.S. investment bank helped bring on a wider financial crisis.
On Wall Street, the Dow Jones Industrial Average fell 466.43 points, or 1.35%, to 34,118.45, the S&P 500 lost 65.12 points, or 1.47%, to 4,367.87 and the Nasdaq Composite dropped 267.52 points, or 1.78%, to 14,776.45.
Economically sensitive sectors, including financials and energy, were hit particularly hard.
The pan-European STOXX 600 index dropped 1.83%, with mining stocks skidding.
The selloff on Monday has seen a cumulative $2.2 trillion of value being wiped off the market capitalization of world equities from a record high of $97 trillion hit on Sept. 6, according to Refinitiv data.
Concerns over Evergrande come as equities have faltered recently as investors worry over the impact of coronavirus cases on the economy and when central banks will ease back on monetary stimulus.
The U.S. Federal Reserve is due to meet on Tuesday and Wednesday as investors look for when it will begin pulling back on its bond purchases.
Investors were also keeping an eye on other central bank meetings spanning Brazil, Britain, Hungary, Indonesia, Japan, Norway, the Philippines, South Africa, Sweden, Switzerland, Taiwan and Turkey.
In currency trading, the dollar index rose 0.137%, with the euro down 0.09% to $1.1714.
The Japanese yen strengthened 0.37% versus the greenback at 109.56 per dollar.
Benchmark 10-year notes last rose 14/32 in price to yield 1.3243%, from 1.37% late on Friday.
The iShares exchange-traded fund tracking high-yield corporate bonds edged down 0.3% in early trading on Monday.
Oil fell amid the rising risk aversion, although crude pared earlier losses on signs that some U.S. Gulf output will stay offline for months due to storm damage.
U.S. crude fell 1.6% to $70.82 per barrel and Brent was at $74.41, down 1.23% on the day.
Spot gold added 0.5% to $1,763.36 an ounce, rising off of a one-month low.
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