Evergrande fears echo around the markets
European stock markets are down this afternoon as renewed fears about the heavily indebted Chinese property group, Evergrande, have dented sentiment. The firm has come under huge strain recently, so much so, that trading in its shares was halted in late September, and it recommenced today. In a way, the concerns surrounding Evergrande, sort of represent the wider property market in China, as it is overstretched. Some traders fear that if Evergrande were to go into meltdown, it could trigger a brutal property crash in China – which would ripple out around the world. Equities in Europe and the US have enjoyed rallies recently, so the news that Evergrande shares fell 12% overnight, set the tone today. It could be said that Evergrande would only look to starting trading again if it is strong enough to withstand the pressure of the markets, so perhaps the firm will muddle on.
The US dollar saw a lot of volatility today as the US posted mixed economic data. The jobless claims reading dipped to 290,000, a new 19 month low. It also undershot the 298,000 consensus estimate. Earlier this month, it was confirmed the unemployment rate dropped to 4.8%, the lowest mark since the pandemic began. It is clear the labour market is slowly but surely recovering. Today’s Philly Fed manufacturing reading was less impressive as it came in at 23.8, missing the 25.1 forecast, and it was a drop from the 30.7 posted in September. EUR/USD and GBP/USD are a little lower as the greenback has firmed up a touch. The Japanese yen and the Swiss franc are outperforming this afternoon as the risk-off strategy is popular.
The slight move higher in the US dollar has encouraged traders to reduce their positions in gold and silver. Last week, gold hit a one month high, and today, silver reached it highest mark since early September, so when the US dollar ticked up, that put some pressure on the assets. Things are a lot worse for industrial metals such as platinum, palladium, and copper, as they are suffering large declines. The concerns about China’s overheated property market are weighing on the commodities as the country is a major importer of metals.