Stock index futures showed Wall Street was set for a weaker open while world shares were heading for a weekly loss on Friday on China jitters and global growth concerns, though strong US retail sales data boosted the dollar.
Shares in embattled property developer China Evergrande , which has two trillion yuan (€263 billion) in liabilities and faces an $80 million bond coupon payment next week, dropped a further 3.4 per cent on Friday, down 30 per cent this week.
The editor-in-chief of state-backed Chinese newspaper Global Times warned Evergrande that it should not bet on a government bailout on the assumption it is “too big to fail”.
“The underlying risk for markets is if Evergrande is not bailed out by the Chinese government,” said Giles Coghlan, chief currency analyst at HYCM, though he added: “I don’t think Evergrande is a Lehman scenario - it’s not going to be a massive systemic risk.”
US stock futures, the S&P 500 e-minis fell 0.3 per cent, after the S&P 500 index dropped 0.17 per cent in the previous session.
MSCI’s world equity index was flat at 735.46, down 0.25 per cent on the week. The index hit a record high of 749.16 on Sept 7.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.27 per cent but was on course to finish down 2.6 per cent on the week, which would be its worst week in four.
The pan-European Stoxx 600 index and the FTSE 100 both dipped 0.23 per cent.
Stock market prices were expected to be erratic on Friday due to “quadruple witching” day, when four different futures and options contracts expire.
Chinese data earlier this week suggested growth in the world’s second-largest economy will slow in the second half of this year, while economists polled by Reuters said they expected the US economic rebound to have been dented in the third quarter, partly due to the spread of the Delta coronavirus variant.
The Federal Reserve, facing a labour market that may be stalling or on the cusp of a surge, is expected next week to open the door to reducing its monthly bond purchases while tying any actual change to US job growth in September and beyond.
“There remains an underlying tension with concerns about the growth outlook and central bank tightening weighing on sentiment,” said Seema Shah, chief strategist at Principal Global Investors.
“Perhaps there is too much caution – although growth in the US and likely in Europe is slowing, it will still be at a solid pace – but the combination of slowing growth and tightening monetary policy will inevitably weigh on returns going forward.”
However, stronger than expected US retail sales data on Thursday boosted the dollar, which held steady near the previous day’s three-week high against an index of currencies. The euro rose 0.12 per cent to $1.1776.
The yield on Germany’s 10-year government bond, the benchmark for the euro zone, was at -0.280 per cent after rising as much as 3.5 basis points to a two-month high of -0.277 per cent, after a Financial Times report suggested the European Central Bank expects to hit its 2 per cent inflation target by 2025.
ECB governing council member Gabriel Makhlouf said on Friday he expected similar levels of inflation in the coming months, after a 3 per cent rise in August.
The yield on benchmark 10-year Treasury notes was little changed at 1.3395 per cent.
In Asia, Hong Kong’s Hang Seng Index and Chinese blue chips rose 1 per cent and Japan’s Nikkei gained 0.58 per cent to head back towards a 31-year high hit on Monday.
US crude fell 0.56 per cent to $72.20 a barrel, and Brent crude dropped 0.41 per cent to $75.36 per barrel, as more supply slowly came back online in the US Gulf of Mexico following two hurricanes.
Gold was trading at $1,759 per ounce, up 0.37 per cent after falling 2.3 per cent on Thursday as higher yields hurt the non-interest bearing metal. – Reuters
