Global shares mixed as investors eye China property worries

By: |
September 21, 2021 5:31 PM

U.S. shares were set for gains, with the future for the Dow industrials gaining 1.1per cent to 34,211.00. The S&P 500 future climbed 1.0per cent to 4,392.75.

“The whisper is that this could be China's Lehman moment.' Even with Chinese markets closed until Wednesday, we are seeing knock-on sell-offs around the world,” said RaboResearch.“The whisper is that this could be China's Lehman moment.' Even with Chinese markets closed until Wednesday, we are seeing knock-on sell-offs around the world,” said RaboResearch.

Global shares were mixed on Monday, with European benchmarks and U.S. futures higher after a choppy day of trading in Asia. France’s CAC 40 added 1.4per cent in early trading to 6,546.97, while Germany’s DAX rose 1.5per cent to 15,357.83. Britain’s FTSE 100 edged up 1.0per cent to 6,975.51.

U.S. shares were set for gains, with the future for the Dow industrials gaining 1.1per cent to 34,211.00. The S&P 500 future climbed 1.0per cent to 4,392.75.

In Hong Kong, the Hang Seng recouped earlier losses, gaining 0.5per cent to 24,221.54. Tokyo’s Nikkei 225 dropped 2.2per cent to finish at 29,839.71. Australia’s S&P ASX 200 gained 0.4per cent to 7,273.80. Worries over heavily indebted Chinese real estate developer Evergrande are weighing on sentiment.

Analysts said fears the damage from a property bust in China could ripple worldwide were drawing on memories of past financial crises such as the bursting of the Japanese “bubble” economy or the 2008 sub-prime mortgage crisis.
In Japan, that catastrophe is called the Lehman crisis for the 2008 collapse of the Lehman Brothers which aggravated the situation.

“The whisper is that this could be China’s Lehman moment.’ Even with Chinese markets closed until Wednesday, we are seeing knock-on sell-offs around the world,” said RaboResearch.

Property companies have been big drivers of the Chinese economy, which is the world’s second-largest.
If they fail to make good on their debts, losses taken by investors who hold their bonds would raise worries about their financial strength. Those bondholders could also be forced to sell other, unrelated investments to raise cash, which could hurt prices in seemingly unrelated markets.

It’s a product of how tightly connected global markets have become, and it’s a concept the financial world calls “contagion.” Many analysts say they expect China’s government to prevent such a scenario, and that this does not look like a Lehman-type moment. Nevertheless, any hint of uncertainty may be enough to upset Wall Street after the S&P 500 has glided higher in almost uninterrupted fashion since October, leaving stocks looking expensive and with less room for error.

On top of those worries, investors are watching to see if the Federal Reserve might ease off the accelerator on its support for the economy. And heavy government spending to counter the impact of the pandemic has raised the likelihood that Congress may opt for a destructive game of chicken before allowing the U.S. Treasury to borrow more money.

The Fed is due to deliver its latest economic and interest rate policy update on Wednesday. In energy trading, benchmark U.S. crude rose USD1.04 to USD71.33 a barrel. Brent crude, the international standard, added USD1.21 to USD75.13 a barrel.

In currency trading, the U.S. dollar rose to 109.62 Japanese yen from 109.39 yen. The euro cost USD1.1734, up from USD1.1726.

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