Bloomberg
Stocks Slump Amid Fed, China Risks; Dollar Gains:
Markets Wrap
Andreea
Papuc and Robert Brand
Mon,
September 20, 2021, 10:12 AM·3 min read
https://finance.yahoo.com/news/stocks-set-dip-traders-mull-220038314.html
(Bloomberg)
-- Stocks in Europe plunged and U.S. equity futures declined at the start of a
week abounding with risks including spillover from China Evergrande Group’s
debt woes, falling commodity prices and the Federal Reserve policy meeting.
The Stoxx
Europe 600 index dropped 1.6%, on track for the biggest decline in two months.
Raw materials led the broad-based retreat as iron ore extended a slump below
$100 a ton after China stepped up restrictions on industrial activity. Base
metals including copper also fell as the dollar rose before Wednesday’s Fed
meeting, where policy makers are expected to start laying the groundwork for
paring stimulus. Treasury yields ticked lower.
U.S.
contracts dropped after the S&P 500 slid the most in a month, a test for
the buy-the-dip mentality as the gauge jabs at its 50-day moving average. Hong
Kong shares tumbled amid the biggest selloff in property stocks in more than a
year as traders tracked the risk of contagion from the debt crisis at developer
Evergrande, which is fueling new fears about China’s growth path. The offshore
yuan declined.
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.
“The edges
of the bullish narrative cover are being pulled and the darker underlying
reality is coming to the fore,” said Sebastien Galy, a senior macro strategist
at Nordea Investment Funds SA. “It is taking the market more time to price in
these shocks than I had expected, and the market is far more realistic as the
buy-on-dip mentality fades with the fear of inflation.”
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.
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