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US pre-open: Futures sharply lower amid contagion fears from Evergrande meltdown

By Iain Gilbert

Date: Monday 20 Sep 2021

US pre-open: Futures sharply lower amid contagion fears from Evergrande meltdown

(Sharecast News) - Wall Street futures were firmly in the red ahead of the bell on Monday as an already rough month for major indices looked set to get even rougher still.
As of 1230 BST, Dow Jones futures were down 1.64%, while S&P 500 and Nasdaq-100 futures had the indices opening 1.39% and 1.14% lower, respectively.

The Dow closed 166.44 points lower on Friday as all three major indices ended the week in the red.

Markets participants were in a selling mood before the open amid concerns regarding the potential domino effect of Chinese property giant Evergrande's massive plunge on the nation's property market and fears that the Federal Reserve will signal that it was prepared to start pulling away monetary stimulus at its two-day policy meeting starting on Tuesday as a result of surging inflation and an improving job market.

Heightened Covid-19 cases due to the Delta variant were also firmly in focus, with cases remaining at January levels ahead of the onset of colder weather in North America.

Markets.com's Neil Wilson said: "Contagion risks from the Evergrande meltdown are the prime cause of today's sell-off. You've got all kinds of banks and insurers caught in the net but ultimately, I don't see this as a Lehman's moment right now. But combined with the tech crackdown it's probably another reason why investors will be seeking to avoid China in the near-term. What we are seeing today is how risks get priced gradually then suddenly. It is definitely though a major cause for investor concern right now and it is possible we see further losses before the dip finally gets bought. A market so well-conditioned to buying the dip will find it hard to resist.

"But the Fed meeting this week will be of particular importance - does a Chinese property collapse and energy crisis collide with expectations for a Fed rate hike next year and biting inflationary pressures? That would be a pretty nasty cocktail for risk appetite and I think these are the risks being priced into today's (and possible further) selling."

The yield on the benchmark 10-year Treasury note also slipped four basis points to 1.329%, with investors heading for safety as the Cboe Volatility index, Wall Street's fear gauge, moved above the 25.0 level - its highest reading since May.

On the macro front, the NAHB's September housing market index will be published at 1500 BST.

No major corporate earnings were slated for release on Monday.

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