Iron ore, bitcoin price rise: ASX 200 to open stronger as overseas markets bounce

The price of iron ore has surged back as fears about Chinese property giant Evergrande eased following a surprise deal.

The Australian share market has opened stronger on Thursday morning rising by 0.2 per cent, bouncing off recent sharp losses as concerns ease over Chinese property giant Evergrande.

It grew even further 10 minutes after it opened jumping by 0.7 per cent.

It was also buoyed by gains on Wall Street after the US Federal Reserve hinted it may begin easing its extraordinary support measures for the economy later this year.

Tech stocks experienced the biggest bounce, up 1.4 per cent as Afterpay soared by 3.5 per cent to $130.64, while mining company Fortescue Metals began clawing back its losses with it shares up 5.1 per cent to $16.17

The price of iron ore has also begun recovering after hitting a 14-month low earlier this week. It surged by US$13.55 a tonne or 14.4 per cent to US$107.55 a tonne, CommSec reported.

The price of bitcoin has also improved, rebounding from below AU$55,000 on Wednesday to flirt with AU$60,000 on Thursday morning.

Overseas markets were buoyant overnight after nerves were settled by surprise news that Evergrande had agreed a plan to repay interest on one of its key bonds, avoiding a default that many fear could hammer the domestic and global economy.

Evergrande’s onshore property unit said it reached an agreement with yuan bondholders on an interest payment, Bloomberg reported.

Evergrande’s Hengda Real Estate Group revealed it had “resolved” one coupon payment due on Thursday on its Shenzhen-traded 5.8 per cent September 2025 bond, via “private negotiations”.

Evergrande did not reveal how it plans to deal with US$83.5 million interest payments that are due on Thursday.

China’s central bank also injected 90 billion yuan into the banking system, temporarily easing imminent fears that Evergrande’s massive debt problems could trigger a broader sell off.

Singapore’s iron ore futures gained more than 15 per cent, surging back above US$100 a tonne.

Chinese rebar futures don't care about the Evergrande story. Trading around all time highs. pic.twitter.com/8Sp1yvNclU

— Harry (@HBGrimes) September 22, 2021

#ironore lifted US$13.55 a tonne or 14.4% to US$107.55 a tonne

— CommSec (@CommSec) September 22, 2021

It comes as the US Federal Reserve indicated it may soon start cutting back its huge Covid-19 stimulus programs.

“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the Federal Open Market Committee’s post-meeting statement said.

Federal Reserve chairman Jerome Powell said the jobs market was “very strong” and the central bank expected “rapid growth” in the US economy.

He said the problems of Evergrande were “particular to China”, playing down any risk to the US.

“In terms of the implications for us, there’s not a lot of direct United States exposure,” he said.

“The big Chinese banks are not tremendously exposed, but you would worry it would affect global financial conditions through global confidence channels and that kind of thing.

“But I wouldn’t draw a parallel to the United States corporate sector.”

The central bank also announced it would hold benchmark interest rates near zero — a sign it is still concerned about high inflation. Analysts expect a rate hike in 2022.

Mr Powell, however, said the central bank had made “substantial further progress” on inflation and employment.

“For inflation, we appear to have achieved more than significant progress, substantial further progress. That part of the test is achieved in my view and the view of many others,” he said.

ThinkMarkets analyst Fawad Razaqzada earlier warned “volatility” could return to the markets in the event of “a hawkish tilt from the Fed, which may trigger some risk aversion”.

“The later tapering starts, the better it will likely be for risk assets — and gold,” Mr Razaqzada said.

Workers at a metal stock yard in Shanghai, China. China’s iron ore imports are crucial to the Aussie market. Photographer: Qilai Shen/Bloomberg

The US central bank’s meeting comes against the ever-present backdrop of spiking coronavirus infections and slowing global growth.

But despite those concerns, the Dow Jones index rose more than 1 per cent and the tech-heavy Nasdaq added 1.1 per cent midway through the day of trading on Wall Street while Frankfurt, London and Paris all closed in the black.

— with AFP