Global equities and cryptocurrencies rally after Fed provides clarification on cutback, while Evergrande fears subside for now
- Global stocks and cryptocurrencies rallied on Thursday after the Federal Reserve gave more details of its cut plan.
- Analysts have widely said they expect the Fed to cut its bond purchases in November, with some possibility of delay.
- Fears over Chinese real estate developer Evergrande have subsided, but an offshore interest payment of $ 83.5 million was looming on Thursday.
- See more stories on the Insider business page.
Global stocks and cryptocurrencies rose on Thursday after the Federal Reserve provided more clarity on its plan to pull out stimulus measures, while fears over indebted Chinese real estate developer Evergrande have cooled for the time being.
Futures on the S&P 500 were up 0.74% at 4:50 am ET, after the index broke a four-day losing streak to close 0.95% higher on Wednesday. Dow Jones futures were up 0.71%, while Nasdaq 100 futures were also up 0.71%, signaling gains when markets open later in the day.
Asian stocks rose overnight as concerns dissipated over the risks to the broader financial system of an Evergrande default. China’s CSI 300 index of stocks listed in Shanghai and Shenzhen rose 0.65%, while the Hong Kong Hang Seng climbed 1.01%.
In Europe, the pancontinental Stoxx 600 climbed 1.02% early in trading, while London’s FTSE 100 gained 0.48%.
Cryptocurrencies rallied across the board after falling along with stocks earlier in the week. Bitcoin rose 1% to $ 43,891, according to Bloomberg prices. Ether, cardano, binance coin, and other altcoins all rose more sharply.
Shares climbed after the U.S. Federal Reserve, the world’s most powerful central bank, strongly suggested on Wednesday that it start reducing bond purchases from November and complete the job by mid-2022. Some Fed policymakers have also said they would like interest rates to start rising as early as next year.
Analysts said markets were reassured that Fed Chairman Jerome Powell had left the door open for continued stimulus if the U.S. economy needed it, and his cautious approach to developments. interest rates.
Jim O’Sullivan, chief US macro strategist at TD Securities, said Powell had given an “unambiguous” signal that the Fed would start cutting its bond purchases in November. O’Sullivan has said he doesn’t expect him to start raising interest rates until 2023.
Neil Wilson, chief market analyst at the Markets.com trading platform, said: “Jay Powell continues to distinguish between guiding the market and expecting tightening without unduly worrying investors.”
Read more: Meet the 8 strategists calling for a market correction by the end of the year as Wall Street turns bearish. Here are their main concerns and their main recommendations for positioning themselves against a market collapse.
Always at the center of investors’ concerns, the $ 300 billion debt crisis against Evergrande, China’s second-largest real estate developer. Fears that the company could collapse and send shockwaves through the global economy helped push US stocks to their worst losses since May Monday.
Still, those concerns eased somewhat, after the Evergrande Hengda unit said it had “resolved” an onshore interest payment through negotiation and the company reassured retail investors that they were a top priority. China’s injection of 90 billion yuan ($ 13.9 billion) into the banking system also bolstered those who hoped Beijing would step in to contain any shock.
Evergrande shares jumped 17.62% on Thursday, although they remain more than 80% lower for the year.
But the real estate developer is still seen as in a perilous position, and investors are closely watching a key test for Evergrande on Thursday, when an $ 83.5 million interest payment on an offshore bond is due.
The US bond market changed little after the Fed meeting, a sign that the central bank had not ruffled its feathers. The yield on the main 10-year US Treasury note was roughly flat at 1.336% on Thursday. Yields move in the opposite direction to prices.
Oil prices have continued to rise as the global economy reopens and supplies tighten. Brent crude rose 0.12% to $ 76.29, while WTI crude was 0.1% higher at $ 72.28 a barrel.