Following the Evergrande Rout, global equities finished mixed.
European stocks recovered on Tuesday after fears of the collapse of Chinese property giant Evergrande caused a sell-off across global markets the day before, but a minor comeback on Wall Street fizzled.
Fears that Evergrande’s problems would spread to their financial systems hammered markets on both sides of the Atlantic on Monday, causing key indices to lose one to two percent.
On Tuesday, European sentiment was decidedly upbeat, with London up 1%, Frankfurt up 1.2 percent, and Paris up 1.3 percent.
The Dow and S&P 500 were up and down on Wall Street, with the Dow and S&P 500 posting minor losses towards the close. The Nasdaq only managed a 0.2 percent increase.
In Asia, the picture was mixed, with Hong Kong ending the day up 0.5 percent but Tokyo down 2.2 percent, with Shanghai closed for a Chinese national holiday.
In Asian trade, Hong Kong-listed real estate companies, which had taken the brunt of the selling on Monday and had lost more than 10% of their value, managed to scrape out gains.
There were signs that the Evergrande situation was getting better. In a message to employees, Xu Jiayin, the company’s founder, stated that he “firmly thinks Evergrande will be able to come out of the darkest time soon.”
However, the real estate developer, which has lost more than 80% of its value this year, closed the year in the red.
The next chapter in the Evergrande saga is set to begin on Thursday, when the company, which is engulfed in debts totaling more than $300 billion, is scheduled to pay interest to bondholders on two notes.
Aside from the Chinese tale, analysts at Briefing.com said that “concerns over stretched valuations, peak policy support, and political gamesmanship between – and within – the parties in Washington have held the market’s bullish leaning in check.”
Observers expect the US Federal Reserve will use its policy meeting, which starts on Tuesday, to lay out a plan for unwinding its massive bond-buying monetary easing program, which has been a crucial engine of the global recovery for more than a year.
However, a struggle in Washington over raising the US debt ceiling has raised fears that the government may miss payments on its debt commitments, resulting in a calamitous default.
Markets are also being weighed down by rising Covid-19 infections, a sluggish global economy, and a looming energy shortage.
The International Energy Agency has encouraged Russia to supply more gas to Europe, where fuel costs are soaring.
The OECD warned of a “uneven” global economic recovery on Tuesday, lowering its growth forecast for 2021. Brief News from Washington Newsday.