Monday in the financial markets starts with a small "earthquake". Investors on the Hong Kong stock exchange continue to sell off shares, and the Hang Seng index alone appears to have fallen 4 percent today, worsening sentiment in Europe and the US.
Stocks in Asia took a dive on Monday amid growing concerns about the sustainability of the global economic recovery due to the spread of the delta variant of the coronavirus. In China, the National Bureau of Statistics recently said the foundation of China's recovery still needs to be consolidated. The Hang Seng Index fell about 4 percent to hit its lowest level in 11 months in the 24,000 point region.
Evergrande Group shakes up the market
In China, the No. 1 topic is still what is happening with Evergrande Group and around the company, which seems to be the Chinese equivalent of Lehman Brothers. The share price of the Chinese property developer has fallen by more than 15 percent, its lowest level in 11 years. This came amid the risk of insolvency amid a rapidly approaching debt maturity this week.
Caixin reported on Sunday that about 40 billion yen (CNY) had gone unpaid under the developer's wealth management products. Reuters, in turn, reported that Evergrande Group has begun repaying investors with real estate, allowing them to choose from discounted apartments, offices, retail space or parking lots.
Asia, Europe and US not in the best mood
The ASX index fell more than 2 percent, hitting a two-month low. The declines can be linked to COVID-19 virus infections in Australia. The state of Victoria today saw the largest daily increase in new cases this year, with 567 infections. The main Australian index seems to have fallen to its lowest level since mid-July and is in the region of 7240 points.
Nervous sentiment from Asia also seems to be felt in Europe and the United States. Germany's DAX index, which no longer consists of 30, but 40 companies, is down more than 0.6 percent, and futures on major U.S. indices are down more than 0.5 percent. Dow Jones Industrial Average futures seem to be losing the most - nearly 1 percent.
The dollar is on the rise
The US dollar continues to strengthen on the forex market. EUR/USD is approaching the level of 1.17, last seen a month ago.
The market this week expects the US Federal Reserve to maintain its target range for the federal funds rate at 0-0.25%, which it will announce at the end of its two-day meeting on Wednesday, and investors are waiting to hear whether the US central bank will begin to withdraw stimulus this year as the economy continues to grow and strengthen. Fed Chairman Jerome Powell has asserted that the central bank will take a measured approach to tapering bond purchases, but several policymakers are calling for early tapering despite the recent slowdown in inflation.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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