The Friday Market Minute
- Wall Street turn lower, with a pullback in Tech stocks linked to multi-month highs for 10-year Treasury yields.
- Global stocks peel back from this week’s Fed-inspired rally as China Evergrande misses its dollar-bond debt payment and more companies caution on supply chain disruptions.
- Evergrande enters 30-day grace period after missing an $83.5 million payment late Thursday, while the PBOC injects another $18.5 million into China’s banking system as a cushion.
- Bitcoin slides as the PBOC issues blanket ban on cryptocurrency trading, declaring it ‘resolutely against the law’.
- Nike cautions on holiday hit to sales as supply chains crumble, while Costco plans limits on key item purchases amid COVID-linked stockpiling.
U.S stocks edged lower Friday as investors debate the impact of a China Evergrande default and more companies caution on supply chain disruptions to holiday sales and earnings.
Bitcoin and cryptocurrency prices were also in focus Friday after the People’s Bank of China issued a blanket ban on digital coins and currencies, declaring them “illegal financial activities that are strictly prohibited” in the government’s latest financial sector crackdown.
China Evergrande, the indebted property developer at the heart of systemic risk concerns in Asia, missed an $83.5 million dollar-bond debt payment Thursday and entered a 30-day grace period that it must use to meet obligations for foreign creditors.
“The main problem for Evergrande currently is that it does not have enough money to complete the construction of existing residential property projects,” said ING economist Iris Pang. “That means it cannot sell these properties and so cannot get cash to repay its debts.”
The impact was muted in overnight trading, however, as the PBOC injected another $18.5 million into its financial system and markets rode Walls Street’s solid Thursday rally sparked by a dovish Fed and its bullish assessment on U.S. growth.
Video: Markets still rattled over Evergrande’s potential default (CNBC)
- Collapse of Evergrande will have ‘enormous social impact,’ says Neuberger Berman Rob Drijkoningen, co-head of emerging markets debt at Neuberger Berman, discusses the impact of Evergrande’s crisis on the wider market. CNBC
- Merkel leaves an ‘ambivalent legacy,’ says co-founder of Global Public Policy Institute Thorsten Benner, co-founder & director of the Global Public Policy Institute, discusses Angela Merkel’s legacy and the impact of various election outcomes on the German economy and its relationship with other EU members. CNBC
- Evergrande is an issue that requires some attention, says Santander executive chair Speaking at Money 20/20 Europe, Ana Botin, Santander’s executive chair, says the Evergrande situation in China requires some attention. CNBC
Still, European stocks drifted lower as the impact of Nike’s caution on supply chain disruptions, and a key survey of business conditions in Germany warned of a “bottleneck recession” in the region’s biggest economy. In Britain, oil major BP plc said it had closed some of its gas stations, while the government braces for near-term fuel shortages, owing to a lack of truck drivers and overseas supplies.
On Wall Street, the Dow Jones Industrial Average moved 25 points higher at the start of trading while the S&P 500 bumped 5.5 points into the red.
The tech-focused Nasdaq Composite, however, fell 70 points as benchmark 10-year note yields rose to a multi-month high of 1.456%.
Bitcoin prices were trading lower in the wake of the PBOC statement, falling 7.6% to $41,275.00 each, while prices for Ether fell 10.3% to $2,828.00 each.
Coinbase Global shares slumped 2.5% lower to $231.85 each in pre-market trading, while Robinhood shares were down 0.75% at $45.60 each.
Nike shares slumped lower following its warning on supply chain disruption to holiday sales, falling 6% to $149.80 each.
Costco , as well, noted supply chain impacts to its near-term outlook, adding that it will put limits on the purchases of key household items, including toilet paper and cleaning supplies, owing to an “uptick in Delta-related demand”. Shares in the retailer jumped 2.2% to $462.70 each.
In other markets, the U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked 0.3% lower at 93.156 in overnight trading, helping oil prices — which are priced in dollars — book modest gains amid ongoing concerns linked to domestic supply disruption from the impact of Hurricane Ida.
WTI crude futures for November delivery were marked 22 cents higher from last night’s close at $73.52 per barrel while Brent crude contracts for November, the global benchmark, gained 33 cents to trade at $77.59 per barrel.
This article was originally published by TheStreet.