Growing investor angst about China’s real estate crackdown rippled through markets on Monday, adding pressure on Xi Jinping’s government to prevent financial contagion from destabilizing the world’s second-largest economy.
Hong Kong real estate giants including Henderson Land Development Co. suffered the biggest selloff in more than a year as traders speculated China will extend its property clampdown to the financial hub. Intensifying concerns about China Evergrande Group’s debt crisis dragged down everything from bank stocks to Ping An Insurance Group Co. and high-yield dollar bonds. One little-known Chinese property developer plunged 87% before shares were halted.
A big week for global markets is off to a messy start as stocks plunge around the world and haven bids break out. Blame everything from China Evergrande Group’s woes and the collapse in iron-ore prices to fears over the U.S. debt ceiling.
The endgame for creditors to the Chinese property giant has arrived just as traders are in a state of alert before the Federal Reserve’s meeting this week.
The Stoxx Europe 600 index dropped 1.9% Monday, on track for the biggest decline in two months, as futures on the S&P 500 test key 50-day support levels.
The U.S. stock market is on track to post its worst day in months. And U.S. politics are in part to blame.
As the Dow Jones Industrial Average fell 614 points on Monday — its worst day since July — and the S&P 500 shedding 1.7%, strategists say gridlock on Capitol Hill is starting to send shutters through the market.
The S&P 500 on Monday notched its worst session since May.
An alarming number of companies have warned that profits won’t meet expectations when they report in a month.
The group, including PP Industries Inc. and Sherwin-Williams Co., are primarily materials producers that have struggled amid supply-chain disruptions. While just a small part of the S&P 500, their earnings have historically been the most correlated to the index’s of all sectors, a study by Bank of America Corp. found.
The $3 trillion market for low-rated companies’ debt is having its best year ever, powered by a rebounding economy and investors’ demand for any extra yield.
U.S. companies including Crocs Inc. and SeaWorld Entertainment Inc. have sold more than $786 billion of junk-rated bonds and loans so far in 2021, according to S&P Global Market Intelligence’s S&P. That tops the previous high for a full year in data going back to 2008.
Most people don’t give fertilizer a second thought — except maybe when driving through a particularly fragrant agricultural area. But with prices for some synthetic nutrients at their highest levels since the financial crisis, it could mean weaker harvests and bigger grocery bills next year, just as the world’s supply chains start to recover from the pandemic.
A perfect storm of events — from extreme weather and plant shutdowns to new government sanctions — has hit the chemical fertilizer market this year, slamming farmers already buckling under the strain of rising costs to produce food.
As the world embarks on its journey towards ‘net zero’, a few implications seem straightforward: coal should be oversupplied, natural gas should stay abundant and the marginal cost of electricity should approach zero as renewables take over. In the fullness of time, these propositions may well turn out to be correct, but the road between here and ‘net zero’ seems to have a few unexpected twists and turns.
Take the current situation: global coal consumption peaked back in 2013, yet the price of thermal coal is currently close to its all-time high, having more than doubled in the last few months to ~US$180/tonne. The same has happened to liquefied natural gas (LNG), which has rallied from ~US$7 to ~US$20/mmbtu over the last few months – also an all-time high. European natural gas prices have risen in tandem, which in turn has driven a sharp spike in electricity prices: day-ahead prices across continental Europe have gone from ~€50 to ~€150/MWh – you guessed it, an all-time high. As a knock-on effect, aluminum prices have soared, from US$2,000/tonne at the start of the year to US$2,900/tonne today.
This is unusual, especially because the global economy has yet to recovery fully from the COVID-19 crisis. So what is going on? A common set of factors ties these rallies together. As often happens, the story starts in China.
The combination of a post-COVID-19 recovery and unusually hot weather has increased consumption of electricity sharply this year. Most of China’s electricity is produced from coal, but domestic coal production is increasingly struggling to keep up – the result of regulatory reforms, under-investment and more stringent HSE inspections. Another important source of electricity generation in China is hydropower, but because of droughts in key parts of the country, hydropower has failed to grow this year too.
The land mines for the market are growing. Seasonal weakness is combining with uncertainty over the Covid-19 delta variant’s impact on consumer behavior, rising labor and material costs pushing prices higher as well as poor economic data out of China.
While the S&P 500 is still about 1% from its record high, those land mines are taking their toll on large sectors of the market.
“For the last several months, most stocks have declined more frequently than they have advanced–evidence of a weakening market condition,” CFRA chief investment strategist Sam Stovall said in a recent note to clients.
Protests intensify at China Evergrande Group offices across the country as the developer falls further behind on promises to more than 70,000 investors. Construction of unfinished properties with enough floor space to cover three-fourths of Manhattan grinds to a halt, leaving more than a million homebuyers in limbo.
Fire sales pummel an already shaky real estate market, squeezing other developers and rippling through a supply chain that accounts for more than a quarter of Chinese economic output. Covid-weary consumers retrench even further, and the risk of popular discontent rises during a politically sensitive transition period for President Xi Jinping. Credit-market stress spreads from lower-rated property companies to stronger peers and banks. Global investors who bought $527 billion of Chinese stocks and bonds in the 15 months through June begin to sell.
While it’s impossible to know for sure what would happen if Beijing allows Evergrande’s downward spiral to continue unabated, China watchers are gaming out worst-case scenarios as they contemplate how much pain the Communist Party is willing to tolerate. Pressure to intervene is growing as signs of financial contagion increase.
As a young rapper, Jay‑Z once teamed up with Damon Dash to sell CDs of his music out of a car in the Brooklyn projects. Today, the co-founders of Roc-A-Fella Records are embroiled in a legal fight involving one of the most cutting-edge investments: non-fungible tokens.
The lawsuit is among a flurry involving NFTs as U.S. courts begin to grapple with the novel legal issues surrounding ownership and regulation of the assets, which have recently exploded in value. More than half a dozen suits citing NFTs have been filed in federal courts alone since the start of 2020, as monthly trading volume in the world’s biggest NFT marketplace, OpenSea, soared from $8 million six months ago to more than $1 billion in August.
The dispute began in June, when Roc-A-Fella sued Dash, seeking to stop him from auctioning off the copyright to Jay‑Z’s debut album, Reasonable Doubt, as an NFT, which represents ownership of a digital object on a blockchain. Roc-A-Fella says that while Dash holds a one-third stake in the company, it owns the album itself, and he has no legal right to sell the NFT.