Global stocks fall after Evergrande's Hong Kong trading halt rattles nerves, while oil wavers ahead of OPEC+ meeting
- Global stocks fell Monday after trading in Evergrande's shares was suspended in Hong Kong.
- Investors are concerned about what appears to be a slow dismantling of the property developer.
- Oil futures wobbled ahead of the OPEC+ meeting, which could decide to lift production targets after the recent rally.
Global stocks fell Monday after a trading halt for beleaguered Chinese property giant Evergrande worried investors, while oil prices wobbled as investors braced for a meeting of major oil producers later in the day.
Futures on the Dow Jones were down 0.2%, while those on the S&P 500 lost 0.3%. Nasdaq futures declined 0.5% as of 5:50 a.m. ET, suggesting an unwinding of Friday's gains later in the day.
In Europe, the pan-continental Euro Stoxx 600 index dropped 0.2%, while Frankfurt's DAX moved 0.4% lower.
In Asia, shares in Hong Kong's Hang Seng index sank by 2.4%, while markets in mainland China were closed for a holiday. With South Korea also on holiday, trading was thin on other regional indexes. Tokyo's Nikkei fell 3% after Fumio Kishida was voted in as Japan's new prime minister.
Revived jitters over the China Evergrande crisis were driving the losses. Trading in shares of the debt-laden property developer and its property management unit were suspended on Monday pending word of a "major transaction," the Hong Kong Stock Exchange said.
The halt comes as Evergrande faces a $260 million offshore bond interest payment that matured Sunday, so effectively due Monday. Last week, the company for the second time showed no sign of making an interest payment on a dollar bond. Unlike those obligations, the payment due Monday doesn't have a 30-day grace period.
If "no sign of payment occurs, the negative noise around the company and China's property market will increase once again," Jeffrey Halley, senior market analysts at Oanda, said in a note. "There still remains very little visibility from the Chinese Government over Evergrande's fate, although a slow and steady dismantling of the company appears to be the favoured course right now."
After the trading halt, Chinese media reported that Hong Kong-listed real estate company Hopson Development has agreed to buy 51% of Evergrande's property service business for more than $5 billion.
Markets are grappling with other headwinds, too, including ever-higher inflation, the energy crisis, Congressional wrangling over the US debt ceiling, COVID-19, and tighter central bank policy. Official US data on Friday showed core inflation climbed 3.6% in August year-on-year, its biggest rise in three decades.
Oil futures were wavering ahead of the OPEC+ meeting later Monday, which could determine whether production targets will be adjusted to calm tremors in the global energy market. Members will likely weigh whether to lift targets gradually or open the taps at a faster rate that could bring down prices.
Brent crude was roughly flat at $79.39 a barrel. West Texas Intermediate was down 0.5% to $75.49 as of 3:50 a.m. ET, but reversed losses later in the session.
Bank of America said last week that Brent crude could hit $100 a barrel for the first time since 2014. Tightness in the global natural gas market could add to upward pressure on crude, as high natural gas prices encourage energy customers to switch to oil, the bank said.
"While higher energy prices clearly have economic consequences, it is worth remembering this is not the 1970s, and the world is less energy-intensive than it was," said Paul Donovan, chief economist at UBS Global Wealth Management.