Asian stock markets faced heavy selling pressure, with Hang Seng and CSI 300 extending the previous day's decline, driven by growing concerns about China's property sector. Evergrande Group's mainland unit reported a failure to repay an onshore bond, exacerbating uncertainty about the developer's future. Although efforts to revive restructuring plans are underway, investors are increasingly worried about the potential for liquidation.
European and US futures also traded in the red as Treasury yields continued to rise. The hawkish stance of the FOMC and most major central banks has placed bears in control. Persistent concerns about inflationary pressures, driven by the resilient economy and higher oil prices, weighed on sentiment. Additionally, the surge in interest rates can be attributed in part to the onset of supply-related issues.
Moody's highlighted that a possible government shutdown at the end of the month would have a "negative" impact on ratings. Wall Street initially saw opening losses, but a boost in risk appetite later reversed the trend, also pressuring Treasuries.
Market Snapshot
- Foreign Exchange: The USDIndex crossed the 106 mark as risk aversion intensified. EURUSD and GBPUSD both breached key support levels at 1.06 and 1.22, respectively. USDJPY strengthened to an intraday high of 149.18.
- Stocks: JPN225 fell 1.0% to 32,054, ASX dipped 0.5% to 7,044.90, Hang Seng shed 0.9% to 17,576.83, while the Shanghai Composite declined 0.2% to 3,109.69. Amazon rose 1.7%, exerting upward pressure on the US500. US500 fell 0.4% at the London open, while US100 futures slipped 0.6%.
- Commodities: Oil slipped below 88.00, with the next support level at 86, primarily due to US Dollar strength, which seems to outweigh supply tightness. Gold retested the 200-day SMA at 1909.
- Upcoming Events: The Bank of England's Governor Bailey is set to preside over a meeting of the central bank's Financial Policy Committee. Additionally, the US will release data on CB Consumer Confidence and New Home Sales.
- Notable Move: The VIX (+5.5%) extended gains, approaching a one-month resistance level at 18.20.