Fears of a major bankruptcy in the Chinese real estate sector predicted a statement from the Federal Reserve did not do the work of evaluating US stocks. The S&P500 had its worst session in nearly seven months after setting a new all-time high at the start of the month.
in market comments Chinese developer Evergrande was the most talked aboutWhich could go bankrupt any week now, leaving creditors in the ice. Evergrande’s liabilities are estimated at more than $305 billion. However, the case has a longer history and definitive conclusion, which Maciej Kaluasinski wrote earlier in an article entitled “The world’s most indebted developer threatens to go bankrupt”.
In the past weeks, market reactions have been limited to Asian exchanges and select commodities. It was only on Monday that the Chinese sewer spilled over into global financial markets. In Europe, the main indicators lost 1.5-2.5%. WSE indices fell further – 2.5-3.3%. The selloff also hit the crypto sector, with bitcoin prices down 8% and ethereum down nearly 9%.
The session in New York also ended well below par, as the slow record-breaking fest that’s been going on since the beginning of March has stalled. The S&P500 fell 1.7% and stopped at 4,357.73 points. Although at the end of the session it was possible to compensate for a large part of the losses, it was the worst session for this indicator since February 25. The Dow Jones Industrial Average fell 1.78% to 33,970.80 points. In the last 30 minutes of the session, the Dow Jones Industrial Average cut the size of the decline by almost a full percentage point! The Nasdaq fell 2.19% and ended at 14,713.90 points.
So far, it’s hard to talk of a correction on Wall Street – the S&P500 remains just 4.1% below its September peak all along. Perhaps this is just the beginning of the correction that the stock market bears have been waiting for in recent months of monotonous gains. What’s more, in the background there are still more dangerous matters to the American investor than any crisis in China.
It is about Wednesday’s meeting of the Federal Reserve authorities, which may signal the start of reducing the bond-buying program – the so-called tapering. Although speculation has been around since early spring, Wall Street has so far not been underestimated by the threat to turn off the faucet with cheap money, which has been supplying global financial asset markets for a year and a half. Market consensus assumes that “eavesdropping” won’t be announced until November or December (note: its announcement does not have to be synonymous with instant launch).
Morgan Stanley strategists predict that if the Fed limits bond purchases, the correction on Wall Street could reach 10% or even 20% if signs of a slowdown in economic growth deepen.
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