Markets Tumble on Evergrande Jitters; Energy Crisis Eases - What's Moving Markets

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Markets Tumble on Evergrande Jitters; Energy Crisis Eases - What's Moving Markets
Credit: © Reuters.

By Geoffrey Smith -- Global stock markets tumble and the dollar rises ahead of a likely default by one of China's biggest real estate developers. Wall Street is set to open sharply lower at the open as a consequence. Europe's energy crisis shows signs of easing, but fertilizer plants are still being hit by high gas prices, and Tesla (NASDAQ: TSLA ) gets a dressing-down from the new head of the NTSB. Here's what you need to know in financial markets on Monday, 20th September.

1. Global markets tumble on Evergrande jitters

Global stock markets tumbled as nerves frayed ahead of a number of big risk events later in the week, including the Federal Reserve’s policy decisions on Wednesday.

The action was concentrated in Hong Kong, the only open market in China, where the Hang Seng index fell 3.3% on fears that the likely default of real estate developer China Evergrande (OTC: EGRNY ) on Thursday would trigger broader distress in the financial and real estate sectors. Three of the index’s biggest developers, Henderson Land (OTC: HLDCY ), New World Development  (OTC: NDVLY ) and Sun Hung Kai Properties (HK: 0016 ), all fell more than 10%.

The move, along with Friday’s weak close on Wall Street, also pushed European benchmark indices down by between 1.5% and 2.2%. In commodities markets, Iron ore Futures tumbled again due to the read-across for steel demand from the property and financial sectors.

2. Europe energy crisis eases

Europe’s energy crisis showed signs of easing but still risks getting worse before its gets conclusively better.

U.K. power prices receded from last week’s highs on the increased availability of wind power. However, the U.K. government is holding crisis talks with the energy industry ahead of a wave of likely bankruptcies to smaller suppliers, which will threaten deliveries to their final customers.  Norwegian oil and gas giant Equinor (NYSE: EQNR ) also received permission from regulators to increase exports to the EU from its Troll and Oseberg fields.

Lower demand from U.K. power generators is also taking the edge off EU gas futures, although signs of stress in the system continue: Fertiberia, Spain’s largest ammonia producer, will delay the reopening of two plants after scheduled maintenance while gas prices remain so high. Norway’s Yara (OTC: YARIY ), meanwhile, said it will cut its European ammonia production 40%.

3. Stocks set to open lower, streamers vs legacy channels in focus after Emmys

U.S. stocks are set to open sharply lower later, as Chinese and central bank risks prompt investors to take money off the table after a strong year-to-date.

By 6:15 AM ET (1015 GMT), Dow Jones futures were down 547 points, or 1.6%, while S&P 500 futures were down 1.4% and Nasdaq 100 futures were down 1.0%.

Additional risks lurking include the suspension of federal government agencies due to the ongoing dispute over the debt ceiling, although analysts note that this argument remains – as usual – largely in the realm of political theater.

Stocks likely to be in focus later include Netflix (NASDAQ: NFLX ), AT&T (NYSE: T ) and Walt Disney (NYSE: DIS ), after the first of those three trounced the other two at this year’s Emmy Awards.

4. NTSB gives Tesla a dressing-down

Tesla (NASDAQ: TSLA ) stock is likely to be in the spotlight after the new head of the National Transportation Safety Board criticised the company’s rollout of driver-assistance software in an interview with The Wall Street Journal.

“Basic safety issues have to be addressed before they’re then expanding it to other city streets and other areas,” Jennifer Homendy told the WSJ, days after Tesla CEO Elon Musk told customers that they will soon be able to request an enhanced version of the ambitiously-named “Full Self Driving” software suite, which aims to help drivers in cities.

A host of recent YouTube videos have illustrated the mixed performance of the software's Beta version in urban settings, which required frequent human driving interventions.

5. Oil tumbles on economy fears, higher output

Crude oil prices tumbled as fears for the global economy coupled with the steady restoration of production in the Gulf of Mexico and signs of increased production in the mainland U.S. to release some of the tightness in the world market.

By 6:25 AM ET, U.S. crude futures were down 2.2% at $70.25 a barrel, while Brent futures were down 1.8% a barrel.

On Friday, Baker Hughes’ rig count had shown a total of 512 active rigs in the week to Sep. 17, the  highest since April 2020 and double the level from the same time in 2020. At the same time, less than 500,000 barrels a day of output is now missing in the Gulf, with 77% of production back online.

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