Wall Street was set for an upbeat start Monday, as fears over the potential collapse of indebted Chinese property developer China Evergrande faded and international oil prices hit three-year highs.
Futures for the Dow Jones Industrial Average indicated an open 140 points higher, after the index rose 33 points Friday to close at 34,798. Futures for the S&P 500 and Nasdaq pointed to a similarly strong open.
Overseas, Hong Kong’s Hang Seng Index closed just below flat. Germany’s DAX rose 0.8%, outperforming other European indexes, after weekend election results showed the center-left Social Democrats pulling ahead, giving leader Olaf Scholz the mandate to form a government.
Global markets were upbeat, pushing past fears over Evergrande that defined last week. Analysts noted that U.S. political tensions over the debt ceiling, a possible government shutdown, and the major infrastructure bill being in jeopardy added a black cloud on the horizon.
“One factor that will greatly influence yields over the week ahead is the ongoing U.S. debt ceiling / government shutdown / infrastructure bill saga that is coming to a head as we hit October on Friday—the day that there could be a partial government shutdown without action by the close on Thursday,” said Jim Reid, a strategist at Deutsche Bank. “It’s a fluid situation.”
Michael Hewson, an analyst at broker CMC Markets, added that “concerns about contagion effects from Evergrande haven’t gone away, but they appear to have taken a back seat to worries about supply-chain blockages, surging energy prices and rising inflationary pressure. This also helps to explain the sharp rise in bond yields which we saw last week.”
The yield on the 10-year U.S. Treasury note was sitting near 1.45%, holding at elevated levels after bond yields surged last Thursday.
In commodity markets, international oil benchmark Brent futures were changing hands at three-year highs, up 1.1% to $78.10 a barrel. U.S. oil futures similarly rose to $74.80.
“This move has real momentum behind it, as well as solid fundamental rationale as oil markets tighten,” said Neil Wilson, an analyst at broker Markets.com. “The tightness in the physical market means inventories are being drawn down around the world.”
Here are eight stocks on the move Monday:
Evergrande’s electric-vehicle arm, Evergrande New Energy Auto (0708.H.K.), sank 9.4% in Hong Kong as the cash crisis at its parent company spread. The car company has warned of a shortage of funds and canceled a stock market listing in Shanghai. The stock is down 93.4% year-to-date.
Rolls-Royce (RR.U.K.) rose 7% in London, after the British engineering group won a major contract to provide engines for the U.S. Air Force’s B-52 Stratofortress.
Macau has tightened up travel restrictions amid concerns around Covid-19, adding pressure to the already weakened gaming sector in the world’s largest gambling hub. China Sands (1928.H.K.) fell 4%, Wynn Macau (1128.H.K.) slipped 4.5%, and MGM China (2282.H.K.) tumbled 10.4% in Hong Kong.
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