European shares slide as China’s Evergrande crisis casts shadow

Fears mount that wider Chinese economy may be affected, with global knock-on effects

Wall Street’s main indexes tumbled at the open on Monday. Photograph: Courtney Crow/New York Stock Exchange via AP

Wall Street’s main indexes tumbled at the open on Monday. Photograph: Courtney Crow/New York Stock Exchange via AP

 

European shares tumbled on Monday as growing solvency worries about property group China Evergrande spooked investors, in a dour start to a week packed with meetings of major central banks.

The pan-European Stoxx 600 index was down 1.7 per cent, with mining stocks plunging 3.6 per cent on a slide in commodity prices. Asian equities ended sharply lower following a torrid session for China Evergrande Group, the world’s most indebted property developer.

“More significant from the perspective of world markets is the concerning situation with huge Chinese property developer Evergrande, which appears to be teetering on the precipice with concerns about contagion from the situation infecting the wider economy in China. This is particularly bad news for miners,” said Russ Mould, investment director at AJ Bell.

The benchmark European Stoxx 600 has declined for three straight weeks on worries about slowing global growth, soaring inflation, persistently high Covid-19 cases and the spillover from tighter regulation of Chinese firms.

DUBLIN

Bank of Ireland and AIB followed their European peers lower, falling 2 per cent and 4.7 per cent respectively. Having finished the last session on a high, Ryanair was down 1.2 per cent at €16.67. The airline said last week it expected to fly 225 million passengers a year by 2026, up from 200 million previously as it eyes a strong recovery from the Covid-19 pandemic.

The State’s largest hotel chain, Dalata, continued on a positive run, rising 1.4 per cent to €3.55, as hospitality gradually reopens and hotel occupancy rates recover.

Packaging group Smurfit Kappa was down 3 per cent at €46.50 amid wider industry concerns about inflation and rising input prices. While central banks insists the current uptick in prices is transitory – related to a post-pandemic price unwind – an increasing number of commentators believe it could last longer. With house price at a three-year high of 8.9 per cent, Cairn Homes was up 1.6 per cent to €1.14. Food giant Kerry was up nearly 1 per cent at €121.80.

LONDON

London’s Ftse 100 ended at a two-month low on Monday, dragged down by heavyweight miners and banking stocks, while concerns about rising inflation also weighed on the index ahead of a rate decision by the Bank of England this week.

The blue-chip Ftse 100 index fell 0.9 per cent. Miners Glencore and Anglo American and financial stocks Prudential and HSBC Holdings led the declines. Banking shares were the biggest fallers with their sub-index down 4 per cent, tracking benchmark bond yields lower as investors sought safety in government bonds on concern over the problems at China Evergrande.

On a positive note, British travel stocks gained on reports that the US is planning to relax travel curbs on vaccinated passengers from the European Union and Britain. Shares of Aer Lingus owner IAG soared about 11 per cent, while Wizz Air, EasyJet and SSP Group gained 1.4-5.9 per cent.

EUROPE

German shares fell 2.3 per cent as data showed a bigger-than-expected jump in producer prices last month. In its biggest ever overhaul, the blue-chip German index began trading on Monday with an increase in the number of constituents to 40 from 30. China-exposed luxury stocks such as LVMH, Kering, Hermes and Richemont fell 1.3-3.2 per cent, extending sharp losses from last week.

Meanwhile, Europe’s fear gauge jumped to a near eight-month high. Lufthansa rose 5.5 per cent after saying it expected to raise €2.14 billion to pay back part of a state bailout that Germany’s top airline received during the coronavirus crisis. All major European subindexes were lower, with banks tumbling 4.3 per cent, while utilities, food and beverage and real estate posted the smallest declines.

NEW YORK

Wall Street’s main indexes tumbled at the open on Monday, as concerns about the pace of an economic recovery hit energy and banking shares at the start of a week in which the Federal Reserve will decide on potentially tapering its pandemic-era stimulus.

The Dow Jones Industrial Average fell 125.16 points, or 0.36 per cent, at the open to 34,459.72. The S&P 500 opened lower by 30.04 points, or 0.68 per cent , at 4,402.95, while the Nasdaq Composite dropped 285.83 points, or 1.90 per cent, to 14,758.14 at the opening bell.

Wall Street’s main indexes have been hurt this month by fears of potentially higher corporate tax rates denting earnings and have shrugged off signs inflation might have peaked.

The benchmark S&P 500 is on track to snap a seven-month gaining streak. All eyes on Wednesday will be on the Fed’s policy meeting, where the central bank is expected to lay the groundwork for a tapering, although the consensus is for an actual announcement to be delayed until the November or December meetings.