Global Stock Markets, Commodities, and Cryptocurrencies Plunge Amid China Crisis Concerns

Hong Kong, European and US Stock Markets Fall in Succession
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Investors are demanding repayment of their investments in front of the headquarters of China Evergrande Group, which is facing bankruptcy.
[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] International financial, asset, and commodity markets are shaking amid concerns over a crisis originating from China.

As the bankruptcy crisis of China’s Evergrande Group intensifies, stock markets from Hong Kong to Europe and the United States have plunged consecutively, and cryptocurrencies are also in free fall.

The upcoming regular meeting of the U.S. Federal Reserve's Federal Open Market Committee (FOMC), starting on the 21st, is expected to discuss tapering of asset purchases and prospects for interest rate hikes, which is interpreted as a factor increasing investors' anxiety.

Global investment risks are expected to be reflected in the Korean stock market, which will open after the Chuseok holiday, with significant volatility anticipated.

On the 20th (local time), the Dow Jones Industrial Average and the S&P 500 index started down 1.6% in New York trading. The Nasdaq is falling more than 1.7%.

Major indices on the New York Stock Exchange have been undergoing corrections since September, and showed a sharp decline on this day. This is attributed to the crisis rumors from China triggering turmoil in international financial markets.

The fear index, known as the VIX, rose to 25.7, reaching its highest level since May. This indicates increased market volatility potential.

Earlier, the Hang Seng Index in the Hong Kong stock market closed down 3.3%. Shares of Evergrande, a leading Chinese real estate company, plunged by over 10%. The Evergrande Group crisis rumors dragged down the stock prices of real estate developers listed on the Hong Kong stock exchange.

Following that, in the European markets that opened, Germany’s DAX index fell 2.7%, France’s CAC index dropped 2.1%, and the STOXX 600 index, representing the overall European market, declined 2.2%.

The Wall Street Journal analyzed that concerns over the bankruptcy of China’s Evergrande Group are affecting global markets, deepening the losses in the New York stock market.

Amid rising fears of a financial crisis, safe-haven assets such as U.S. Treasury bonds and the dollar surged. The yield on the 10-year U.S. Treasury bond fell by 0.05 percentage points to 1.319%. A decline in bond yields means bond prices are rising. The dollar index rose 0.16% to 93.32 on the day.

The crisis sentiment also pulled down crude oil prices. Brent crude futures fell 1.8% to $73.95 per barrel. When the dollar strengthens, oil prices typically decline. The possibility of an economic recovery slowdown is also weighing on oil prices.

Copper prices on the London Metal Exchange also plunged 3%. Iron ore prices fell below $100 per ton.

Cryptocurrency losses are also notable. According to CoinMarketCap, Bitcoin’s price dropped 8.3% compared to 24 hours earlier, trading at $43,436.31. During the session, it fell as much as 10% to $42,634.

Compared to Bitcoin, declines in Ethereum, Cardano, Ripple, and others are even greater.

The plunge in cryptocurrency prices is analyzed as a reaction to the sharp stock market decline amid rising crisis concerns from China, coupled with news that the U.S. Financial Stability Oversight Council is likely to conclude that stablecoins pose systemic risks.