Global stocks stable after fall of Wall Street disrupts Asia
US equity futures advanced and European markets opened with small gains. Futures on the Nasdaq rose 0.4%, rebounding from a difficult trading session on Monday that saw the technology-heavy index lose 2.1%.
Investors have been pissed off by the dysfunction in Washington, where lawmakers have made little progress in allowing the U.S. government to continue borrowing to pay its bills. The US Treasury has said it will default if the debt ceiling is not raised by October 18.
Rising oil prices also played a role in Monday’s equity pullback. OPEC and allied producers, including Russia, said Monday they would increase production by 400,000 barrels per day in October and November, defying growing pressure to pump even more to ease the global energy crisis.
US oil prices gained more than 2% to $ 77.62 per barrel, closing at their highest level since 2014. Energy prices have risen sharply in recent months along with a wide range of commodities, fueling investors’ inflationary fears.
Investors have responded to rising prices by selling government bonds, which pushes up yields and tends to hurt tech stocks. When government bond yields are low, it stimulates interest in riskier investments that offer better returns.
The U.S. liquidation and concerns about the Chinese real estate market disrupted Asian stocks on Tuesday.
Investors are worried about struggling Chinese real estate developer Evergrande, which has likely missed two bond payment deadlines in recent weeks. He is looking for buyers for some of his businesses as he struggles to survive a cash crunch.
And there are signs of more trouble in China’s vast real estate sector. Fantasia Holdings, another developer, announced Monday night that it had failed to repay a maturing bond. The company’s shares were halted on Tuesday.
Shares of Country Garden Holdings, China’s second-largest developer in terms of sales, fell 2.8%. Its property management unit – Country Garden Services – fell 3.2% separately, after the company said Fantasia failed to repay a loan to the business and Fantasia was “likely” to default on this payment.