Global stocks fall as Evergrande uncertainty dents confidence, while Fed outlook ignites surge in bond yields

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Global stocks fall as Evergrande uncertainty dents confidence, while Fed outlook ignites surge in bond yields
Spencer Platt/Getty Images
  • Global stocks fell Friday as revived concerns about Evergrande's debt crisis weighed on investors.
  • The troubled Chinese property giant appears to have missed a crucial $83 million bond interest payment.
  • Treasury yields ticked higher on growing hopes the Fed will hike rates sooner than previously expected.

Global stocks fell Friday, with investors on edge as uncertainty surrounded the Evergrande debt crunch situation, while government bond yields rose after the Federal Reserve hinted interest rates could rise quicker than expected.

Futures on the Dow Jones dropped 0.3%. Those on the S&P 500 were down 0.4%, and Nasdaq futures lost 0.5% as of 6:10 a.m. ET, suggesting a lower start to trading later in the day. The three major US indexes all gained more than 1% Thursday, as markets recovered from Evergrande-driven losses at the start of the week.

But the concerns around a debt default by the troubled Chinese property giant were simmering again Friday as it was unclear whether Evergrande had missed its Thursday deadline to make a crucial $83 million bond interest payment.

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Bondholders have not been paid nor heard from the company, people familiar with the situation told Reuters. There has been no word from Evergrande itself.

Evergrande has a 30-day grace period to meet the obligation. If it doesn't pay by then, it will be in default. The size of the property developer means a default could pose risks to China's financial system, which could then spread elsewhere in the world. The People's Bank of China injected $17 billion of cash into the banking system Thursday in a bid to calm nerves.

Evergrande's shares closed 12% lower in Hong Kong on Friday, with the Hang Seng falling 1.5% and the Shanghai Composite dropping 0.8%. Tokyo's Nikkei rose 2.06% as traders returned from a holiday.

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At the same time, prices for US government bonds dropped Friday as investors grew increasingly hopeful that the Fed will raise interest rates sooner than previously expected. The central bank's outlook released Wednesday showed half of the officials on the Federal Open Market Committee expect the first rate hike to arrive next year.

The yield on the 10-year Treasury note added 13 basis points to 1.43% early Friday, marking a two-month high and the biggest daily increase since February 25. Yield on the 30-year Treasury bond put on 9 basis points to reach 1.93%. Yields move inversely to prices.

In the UK, the 10-year Gilt yield moved 10 basis points higher to 0.85% after the Bank of England signaled Thursday that it sees increasing reasons for an interest rate rise.

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London's FTSE 100 fell 0.3%, the Euro Stoxx 50 declined 0.8%, and Frankfurt's DAX lost 0.7%.

Oil prices continue to be supported by production outages in the Gulf of Mexico and lower OPEC+ output than agreed. Coupled with robust demand, the limited supply has caused the market to tighten noticeably, Commerzbank's Carsten Fritsch said.

Brent crude was 0.4% higher at $77.56 a barrel, while West Texas Intermediate rose 0.2% to $73.47 a barrel.

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Gold initially reacted to the hawkish Fed signals and surge in bond yields by falling to $1,740 per ounce, but it last rose 0.3% to $1,755 per ounce on Thursday.

Read More: Michael Albaum built a 63-unit portfolio by living well below his means for almost a decade. The engineer-turned real estate investor breaks down his due diligence-focused strategy and shares how 'doing the work' has allowed him to achieve financial freedom.

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