Newsletter: Not covered
The most important market trends and how the best minds on Wall Street are responding to them. Delivered every day of the week.
Global stocks rose on Wednesday, as fears over indebted Chinese property developer Evergrande eased and the U.S. Federal Reserve provided more details on his calendar to raise interest rates.
The S&P 500 rose 1% mid-afternoon, maintaining gains as Fed Chairman Jay Powell answered questions, putting the blue chip index on track for its best day since July . The tech-rich Nasdaq Composite gained 1%.
The yield on the US government’s 10-year benchmark bond, which rises when prices fall, fell 0.02 percentage points to 1.30 percent.
New projections have shown that a majority of Fed officials expect to hike U.S. interest rates at least three times in 2023, one more than at the last Federal Open Market Committee meeting. However, officials were also divided over the possibility of a rate hike earlier in 2022.
The Fed’s very low interest rates and record stimulus measures have helped prop up equity markets over the past year by keeping bond yields low and pushing investors into riskier assets such as stocks.
A positive update from Evergrande had already pushed the stock markets higher earlier today. Fears that the Chinese real estate developer could default on its debt obligations sparked a global sale Monday, but the company said on Wednesday it had reached an agreement on an imminent refund.
The European Stoxx 600 index rose 1%, while the UK FTSE 100 rose 1.5% on a rally in mining and commodity stocks whose fortunes are tied to the health of the Chinese economy.
Mainland China stocks also fell less sharply than expected as markets reopened for the first time this week after a public holiday, with investors viewing the onshore bond redemption pledge as a sign Evergrande could avert a collapse. disruptive. The CSI 300 stock index fell 0.7 percent.
Evergrande, which has financial obligations of more than $ 300 billion and has been hit by government restrictions on lending to China’s vast real estate sector, said a payment owed to holders of domestic bonds on Thursday had “been resolved”.
The developer did not specify how it would make its onshore bond payment. But the statement reassured investors who were hoping policymakers in Beijing would try to limit potential losses to mainland Chinese lenders, suppliers and homeowners.
“It is likely that we will see a government intervention that relieves domestic creditors,” said Francesco Sandrini, senior multi-asset strategist at Amundi, Europe’s largest fund manager. “The Chinese authorities will do their best to contain any overflow. ”
Evergrande also has an interest payment on a bond held by foreign investors due Thursday.
“The Chinese authorities have a very clear motive and the means necessary to contain any threat of a systemic crisis in the country’s national financial system,” said Udith Sikand of the Gavekal research house. “What happens to international investors is another matter. ”
Sunil Krishnan, head of multi-asset funds at Aviva Investors, warned that if Beijing “tries to contain” Evergrande’s problems, investors should fear “a chilling effect on property development activity and some impact on property development. China’s real estate prices’ which could slow decelerating economy further away.
The dollar index, which measures the greenback against six currencies, slipped 0.1% as traders refrained from making large bets. The euro strengthened 0.2% against the dollar, buying up $ 1.1748.