Global stocks sink on Evergrande contagion fears

Fears about a contagion from the possible collapse of China Evergrande have been felt in Europe and on Wall Street while sending property firms in Hong Kong plunging

World stocks sank Monday as trading floors were gripped by contagion fears from the expected collapse of debt-plagued Chinese property giant Evergrande, while spiking energy costs and the standoff over the US borrowing limit also put investors on red alert.

Strong inflation numbers, uncertainty surrounding the upcoming Federal Reserve meeting, surging Covid-19 infections and signs of weakness in the global recovery further depressed sentiment.

Beyond the Evergrande saga, Gregori Volokhine of Meeschaert Financial Services blamed the standoff over the US debt ceiling -- which the Republican opposition said they will not vote to raise -- for souring the mood on Wall Street.

US Treasury Secretary Janet Yellen recalled in an article for The Wall Street Journal how in 2011 "debt-limit brinkmanship pushed America to the edge of crisis", saying a Washington default would "likely precipitate a historic financial crisis."

Hong Kong earlier dived 3.3 percent, spearheading Asian losses, with Evergrande widely expected to default on upcoming interest payments this week.

- Evergrande meltdown risks -

"Investors are not sure whether Chinese authorities will be able to contain the fallout from a possible disorderly collapse of the heavily indebted company," Thinkmarkets analyst Fawad Razaqzada said.

- Energy crisis -

Against this backdrop, the Federal Reserve's monetary policy meeting this week will be particularly important, according to Markets.com analyst Neil Wilson.

In Hong Kong, property companies and banks bore the brunt of heavy selling.

The Hang Seng Property Index meanwhile dropped more than six percent, its worst performance since May 2020.

Despite the growing crisis, the Chinese government has yet to step in to prevent Evergrande from going under.

New York - Dow: DOWN 1.8 percent at 33,970.47 (close)

New York - Nasdaq: DOWN 2.2 percent at 14,713.90 (close)

Frankfurt - DAX: DOWN 2.3 percent at 15,132.06 (close)

EURO STOXX 50: DOWN 2.1 percent at 4,043.63 (close)

Tokyo - Nikkei 225: Closed for a holiday

Euro/dollar: UP at $1.1726 from $1.1725 on Friday

Euro/pound: UP at 85.84 pence from 85.33 pence

Brent North Sea crude: DOWN 1.4 percent at $74.29 per barrel

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Originally published as Global stocks sink on Evergrande contagion fears