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Stocks on Wall Street faltered on Friday and public debt was liquidated as investors closely watched the ongoing Evergrande crisis and digest hawkish signals from several major central banks.
The US S&P 500 index ended the day up 0.1%, after losing as much as 0.4% at the start of the session. The advance – this is the third consecutive daily gain – helped reverse Monday’s large sell-off when market confidence was shaken by Evergrande.
The tech-focused Nasdaq ended both the session and the week.
The market turmoil was manifested in major mutual fund and exchange-traded fund buybacks over the past week, with investors withdrawing $ 24.2 billion from global equity funds over the course of the past week. of the seven days before Wednesday. This is the first weekly release this year, according to fund flows tracked by EPFR Global.
U.S. equity funds suffered $ 28.6 billion in redemptions over the same period, the largest weekly withdrawal since February 2018.
The yield on the 10-year US Treasury bill, a key benchmark for global borrowing costs, also continued to rise after a sell-off on Thursday. It rose 0.02 percentage point to 1.45%, and briefly hit its highest level since July on Friday.
The weakness in the Treasury market followed the monetary policy decision closely followed by the Federal Reserve earlier this week, when the US central bank said a growing number of policymakers expected to hike rates in 2022 .
The Fed’s message was followed by Norges Bank of Norway becoming the first major Western central bank to hike rates on Thursday and the Bank of England revealing that the deal had “strengthened” for a “modest tightening of the currency. monetary policy ”over the next few years.
“It feels like a swallow doesn’t have a summer, but you see two and investors start to think summer is here,” said James Athey, bond portfolio manager at Aberdeen Standard Investments. “We had a decidedly hawkish Fed. . . people therefore have the impression that central banks are moving towards a stricter policy. “
In response to the change in stance by policymakers, the UK 10-year gilt yield jumped more than 0.1pp on Thursday and another 0.02pp on Friday. The yield on the equivalent German Bund rose 0.03 pp to minus 0.23 percent.
Global stocks were mixed on Friday as the long-awaited bond payment deadline for Chinese property developer Evergrande was passed, sending signs of strain to China’s real estate sector, fears the company’s growing liquidity crunch could spill over. on other sectors and countries.
Evergrande, the world’s most indebted real estate developer, was due to make an $ 84 million interest payment on an offshore bond on Thursday, but creditors told the Financial Times that no payment has yet been received. Evergrande has a grace period of 30 days before a default on payment results in a default on payment.
The European benchmark Stoxx 600 closed 0.9% lower, although it ended the week up 0.3%. London’s FTSE 100 also rose more than 1% for the week, although it was down 0.4% on Friday.
In Asia, Hong Kong’s Hang Seng Index closed 1.3 percent lower, bringing its drop for the week to nearly 3 percent.
Beijing hit investor sentiment further on Friday, aiming to crack down on cryptocurrencies by declaring all digital coin activity “illegal.” The price of bitcoin fell 5% in response, as did the shares of dozens of US-listed companies linked to digital finance such as Riot Blockchain and Marathon Digital.
The dollar index, which measures the greenback against six currencies, rose 0.2 percent. Brent crude, the benchmark for oil, rose 1.1% on Friday to settle at $ 78.09 a barrel.
Not covered – Markets, finance and strong opinion
Robert Armstrong dissects the most important market trends and explains how the best minds on Wall Street are reacting to them. Sign up here to receive the newsletter directly to your inbox every day of the week