{"id":139478,"date":"2021-09-22T13:36:54","date_gmt":"2021-09-22T13:36:54","guid":{"rendered":"https:\/\/precoinnews.com\/?p=139478"},"modified":"2021-09-22T13:36:54","modified_gmt":"2021-09-22T13:36:54","slug":"stocks-breathe-relief-after-evergrande-bond-deal","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/stocks-breathe-relief-after-evergrande-bond-deal\/","title":{"rendered":"Stocks breathe relief after Evergrande bond deal"},"content":{"rendered":"
LONDON (Reuters) – Stocks found relief and riskier currencies gained on Wednesday as market jitters around China Evergrande eased, with the embattled developer striking a deal to pay a coupon on one of its domestic bonds.<\/p> The Euro STOXX 600 added as much as 0.8%, recovering its losses from earlier in the week, with shares in London and Paris both gaining around 1%.<\/p>\n U.S. futures were set to gain 0.5%, with Wall Street investors also focused on the Federal Reserve\u2019s policy decision due later in the day.<\/p>\n Global investors have worried over a possible default by China\u2019s No. 2 property developer, with concerns about the spillover from a messy collapse upsetting markets this week.<\/p>\n But Evergrande\u2019s main unit on Wednesday said it had negotiated a deal with bondholders to settle interest payments on a domestic bond, helping calm fears of an imminent default that could unleash global financial chaos.<\/p>\n The news sent Evergrande\u2019s Frankfurt-listed shares over 40% higher, after hitting multi-year lows a day earlier. It also pushed government bond yields higher, as well riskier currencies such as the Australian dollar and Chinese yuan, keeping a cap on the dollar.<\/p>\n \u201cThis could be a bit of a relief rally,\u201d said Matteo Cominetta, economist at Barings Investment Institute.<\/p>\n \u201cOf course some bondholders may lose some money but the contagion potential of Evergrande in terms of your bank debt, bond debt are quite limited.\u201d<\/p>\n As risk sentiment returned, yields on safe-haven 10-year U.S. Treasuries rose and then eased back to flat at 1.3311%. Euro zone bond yields also edged higher, while the safe-haven yen eased slightly.<\/p>\n The MSCI world equity index, which tracks shares in 50 countries, was flat.<\/p>\n Globally, markets had already started to calm as analysts downplayed the threat of Evergrande\u2019s troubles becoming a \u201cLehman moment\u201d and setting off a financial crisis.<\/p>\n Analysts said the focus was shifting to gauging Beijing\u2019s so-far muted response amid worries about the consequences for a slowing Chinese economy and local financial markets reeling from months of disruptive and radical reform.<\/p>\n \u201cThe world is relatively relaxed about contagion risk for now,\u201d Deutsche Bank analysts wrote in a note, citing a flash poll from Tuesday showing that only 8% of respondents were concerned that Evergrande would still be impacting markets in a month\u2019s time.<\/p>\n \u201cThe bigger risk might be the knock on impact of weaker Chinese growth.\u201d<\/p>\n Returning from a two-day holiday, China shares fell, though a cash injection from the People\u2019s Bank of China kept falls far smaller than feared. Blue chips fell 0.7% and Shanghai Composite reversing losses to add 0.4%.<\/p>\n MSCI\u2019s broadest index of Asia-Pacific shares outside Japan fell 0.3%.<\/p>\n Digital currencies bitcoin and ether, often tied to risk sentiment and buffeted by volatility in recent days, added 4% and 6% respectively.<\/p>\n In currency markets, the Australian dollar rose as much as 0.5% to $0.7268 before giving up part of the gains to last trade up 0.3%.<\/p>\n The dollar index slipped slightly to 93.189, staying not far off Monday\u2019s one-month high of 93.455.<\/p>\n Moves were capped ahead of Wednesday\u2019s Fed meeting, however, and the dollar was flat against the euro, with the risk of a hawkish Fed supporting the dollar.<\/p>\n Most analysts think the Fed will not go into detail about its tapering plans but say risks lie in board members\u2019 \u201cdot plot\u201d of rates projections.<\/p>\n \u201cInvestors are not pricing in some huge hawkish surprise but are expecting tapering discussions, and tapering, to commence later this year, maybe in November, and interest rate lift-off to happen towards the end of next year,\u201d said Salman Baig, portfolio manager at Unigestion.<\/p>\n The outcome of the Fed\u2019s meeting is announced at 1800 GMT with a news conference half an hour later.<\/p>\nAUSSIE UP, DOLLAR FLAT<\/h2>\n