ASX 200 to tumble at opening as Evergrande debt crisis spooks global markets

Highlights

  • Concerns over a debt default at Evergrande have spooked the global stock markets, forcing investors to move to safe heaven assets.
  • The ASX 200 futures a trading 1.3% or 125.2 points lower, indicating another weak opening this week.
  • Crude oil prices traded 2% lower on Monday as investors grew more risk averse.

World stocks ended sharply lower on Monday while safe-haven assets attracted investors as a looming crisis at property group Evergrande spooked the global markets, sparking concerns ahead of a busy week of central bank meetings. Investors preferred safe-haven assets, with US Treasuries gaining in price, shrinking yields, and boosting gold.

Shares of Chinese property developer Evergrande, which has been struggling to raise funds to pay its lenders, took a hit of 10.2%, closing at HK$2.28 on Monday. Regulators have already issued a warning that its mammoth US$305 billion of liabilities could spark broader risks to China's entire financial system.

A bear market indicating a lower opening of the ASX 200 

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On Wall Street, major indices also witnessed a sharp selling, making indices close sharply lower. The Dow Jones fell 614.41 points, or 1.78%, to 33,970.47, while the S&P 500 sank 1.70% to 4,357.73. The NASDAQ Composite ended the session 2.19% down at 14,713.90.

The ferocious sell-off on Monday saw a cumulative value of around US$2.2 trillion being wiped off the market capitalisation of world equities from a record high of US$97 trillion hit on 6 September 2021, according to Refinitiv data.

Coming back to the home turf, Australian shares are set to tumble at the opening on Tuesday, tracking cues from a deep sell-off on Wall Street and global markets on fears that China’s debt-ridden Evergrande may not be able to fulfill its debt obligations,  impacting the pace of global economic growth.

The ASX 200 index futures fell 1.3% or 125.2-point discount to the underlying benchmark index. The ASX 200 closed 2.1% lower at 7,248.2 on Monday, marking its steepest drop since 26 February 2021.

                 

ASX tumbles at start; how is crypto, oil, gold & metal indices doing?

 

On Monday, the Aussie and Kiwi dollars fell for a third consecutive session against the US dollar as concerns about China's economy weighed on risk sentiment and commodity prices.

The Australian dollar took a hit of 0.44% to US$0.7227, having touched a three-and-a-half-week low at US$0.7220, continuing its downward trend from a September 2021 peak of US$0.7477.

Bitcoin (BTC) tumbled as much as 10% in Monday’s session as investors were trying to steer clear of risky assets. BTC is currently trading 7.6% down at US$43,663.4, as of 7:35 AM AEST.

Read more: 10 ASX stocks to watch out for this week

Gold ticks higher

Gold saw an uptick on Monday as concerns about the solvency of Chinese property group Evergrande forced investors to move to safe-heaven assets. However, gains were capped by strength in the US dollar ahead of the Fed’s policy meeting.

ASX gold shares

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Spot gold rose 0.5% to US$1,762.66 per ounce by 1753 GMT, while US gold futures settled 0.8% higher at US$1,765.40 an ounce.

In light of an uptick in gold prices, Australian gold miners such as Newcrest Mining Limited (ASX:NCM), St Barbara Limited (ASX:SBM) and Northern Star Resources Limited (ASX:NST) could remain flat to positive during today’s expected sell-off in the broader Australian market.

Metals nosedived on Monday

Copper prices on Monday fell sharply to one-month low as looming concerns over a debt default at Evergrande Group fuelled a sell-off across financial markets, especially in materials used in the construction

ASX mining shares to tumble at the opening

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Benchmark copper on the London Metal Exchange (LME) had fallen 3.2% to US$9,010 per tonne at 1603 GMT on Monday. Prices of the metal used widely in the construction industry earlier touched a low of US$9,005 a tonne, the lowest since 20 August 2021.

Local Miners such as BHP Group Limited (ASX:BHP), Fortescue Metals Group Limited (ASX:FMG) and Rio Tinto Limited (ASX:RIO) could see a gap-down opening in today’s session. 

Crude oil prices eased

Crude oil prices traded 2% lower on Monday as investors grew more risk averse. Switching to the US dollar as a safe-haven asset made crude oil more expensive to hold in other currencies.

ASX energy shares to open on a negative note

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Brent crude fell 1.9% to US$73.92 per barrel after touching a session’s low of US$73.52. US West Texas Intermediate (WTI) ended 2.3% lower at US$70.29 a barrel.

Australian energy players such as Viva Energy Group Limited (ASX:VEA), Santos Limited (ASX:STO) and Woodside Petroleum Limited (ASX:WPL) could all fall in today’s session.

Read more: Inside Australia’s blossoming love affair with cryptocurrencies

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