Asian markets mixed after China Evergrande warns of cash woes

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Shares in Asia were mixed on Monday, after troubled Chinese property developer Evergrande warned late Friday that it could run out of money.

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Hong Kong fell 1.2% but the Shanghai Composite Index rose. South Korea’s benchmark advanced but Tokyo and Sydney declined.

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More broadly, investors are grappling with uncertainty about the latest coronavirus version and about when the Federal Reserve will end its support for the markets.

Regulators were scrambling to reassure investors after Evergrande, one of China’s biggest developers, Said it could be out of money to “meet its financial obligations” as it struggles to comply with pressure to reduce its $310 billion in debt.

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What is worrying is that volatile levels of debt in the property sector could lead to a financial crisis. China wants to avoid a bailout, but it is also unlikely that the situation will worsen to such an extent that problems will reach that level.

Many real estate companies have been in trouble as the government has pushed for lowering debt levels, but officials have issued a statement saying China’s financial system is strong and default rates are low. Recent statements said that most developers are financially sound and Beijing will continue to keep the lending markets functioning.

Evergrande shares 3333,
-12.44%
fell 9.8% early Monday, helping pull the Hang Seng HSI,
-1.31%
Down more than 1% in Hong Kong.

Chinese tech giant Alibaba 9988,
-4.86%,
Which has been embroiled in a multi-pronged crackdown on the industry that also pulled down benchmarks, with the company saying it is replacing its chief financial officer Maggie Wu and overhauling its e-commerce business.

In Tokyo, Nikkei 225 NIK,
-0.37%
0.4% and the S&P/ASX 200 XJO,
+0.13%
Sydney slipped 0.1%. Shanghai Composite Index SCOMP,
+0.21%
increased by 0.4%, while Kospi 180721,
+0.34%
Seoul gained 0.4%. Benchmark Index in Singapore STI,
+0.85%,
Taiwan Y9999,
+0.04%
and Indonesia JAKIDX,
+0.53%
Achieved it.

“This is a week that will force uneasy contemplation about the ‘known unknowns’ primarily associated with Omicron, the Fed tightening and China (regulatory/asset) risks,” Mizuho Bank said in a commentary.

This will bring yet more uncertainty, it said.

Last week’s volatile swings on Wall Street ended Friday with further losses for stocks, as a mixed batch of US job market data triggered another bout of dizzying trading.

s&p 500 spx,
-0.84%
It closed 0.8% down at 4,538.43. Dow DJIA,
-0.17%
down 0.2% at 34,580.08, while the Nasdaq comp,
-1.92%
fell 1.9% to 15,085.47.

Friday’s jobs report, usually the most anticipated economic data every month by Wall Street, showed Employers added only 210,000 jobs last month, Economists were expecting a stronger recruitment of 530,000, and it raised concerns that the economy could stagnate while inflation remains high. This is a worsening of what has been called “stagflation” by economists, and The advent of the Omron version makes its probability more uncertain.

Some investors said the jobs report could eventually prompt the Fed to be more aggressive about raising short-term interest rates from their record lows. Others said they expected the mixed report to have no effect.

In what matters to Fed stocks as low interest rates have been one of the main reasons the S&P 500 has nearly doubled since the early days of the pandemic. Lower rates encourage borrowers to spend more and investors to pay higher prices for shares.

The Fed is already slowing down its program to buy billions of dollars worth of bonds each month to support the economy and markets.

With some concrete answers about Omicron, investors are sending the market back and forth as minor clues emerge. It is not clear whether existing vaccines are effective against the variant, whether people will fear businesses because of it and whether already high inflation will worsen because of it.

US benchmark crude oil CLF22 in other trades,
+2.31%
It rose $1.46 to $67.72 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, it fell 24 cents to $66.26.

Brent Crude BRNG22,
+2.19%,
The benchmark for international oil pricing rose $1.43 to $71.31 a barrel.

US Dollar USDJPY,
+0.22%
increased from 112.92 yen to 113.00 Japanese yen.

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