The European stock markets start the week with strong declines, which exceed 2% in the main indices. In the case of the Ibex 35, it means giving up the 8,600. The declines are caused by nervousness around Evergrande, the Chinese real estate that is about to fail and drag the entire sector. Experts speak of a wide correction for European stocks, after the Eurostoxx lost its key support. From Ecotrader they point to additional falls of 5% in Europe and 10% for the Ibex 35.
Joan Cabrero, Ecotrader advisor , explains elEconomista’s strategy on the stock market: “I have been insisting for several days that details are lacking to favor the beginning of a correction, as it could be that some bearish gap appears in the stock markets, which is usually the prelude to the vast majority of corrective processes, or that the EuroStoxx 50 loses key supports of 4,080 points “.
The excuse for the bearish whiplash has come from Asia, with the uncertainty generated by the real estate giant Evergrande, on the verge of going bankrupt. The new speculation has led Hong Kong to lose almost 4% with the entire real estate sector pushed down.
With the rest of Asian squares closed for holidays, the lash has reached Europe. The major indices are down about 2% and American futures are down more than 1%. The Eurostoxx gives up key support at 4,080 points.
“If it loses that support at the close, I am very afraid that a corrective context could open in the European stock markets that could lead the main European benchmark to seek in the worst case the 3,800 / 3,900 points, the analogous support zone being in the Ibex 35 the 7,700 / 8,000 points “, comments the expert.
“Investors fear that the fall of the developer Evergrande will have a systemic impact and contagion effect in Europe”
The Evergrande company drags the rest of the real estate sector and other financial securities, in the Hong Kong Stock Exchange. And it is being the detonator of the falls in Europe The company’s liabilities exceed 300,000 million dollars and represents a huge network of cross loans between suppliers, individuals and banks. “Investors fear that the fall of the developer Evergrande will have a systemic impact that will drag down the Chinese fixed income and equities markets, an impact that could end up being transferred to western markets as well,” they explain from Link Securities.
With European stocks moving in a lateral range near highs, only the excuse was needed to correct. “A correction was expected and it is healthy after one of the largest uninterrupted rallies in history, which will eventually resume,” explains Alberto Tocchio, manager of Kairos Partners.
From Asia also come concerns about the possible economic slowdown. There have been sharp declines in the commodity markets , with declines in the prices of iron ore and other metals such as copper, aluminum or zinc.
Metals sink and drag Arcelor
Citi analysts say “sentiment has turned negative over miners amid a weakening Chinese economy and cuts in steel production and concerns about the global growth outlook.” Steel companies were among the first companies to start the stock market rally after the pandemic and today they are falling sharply.
Shares of mining and steel companies in the Industrial Metals Stoxx fell 5% to February lows. Within the Ibex 35, the fall of ArcelorMittal stands out, which has fallen by 6%. Acerinox down 4%.
It is followed by banking with decreases between 4 and 5% for the main stocks such as BBVA, Sabadell or Santander. Very few values remain positive on the Spanish stock market. IAG and PharmaMar are up more than 1%. This weekend, the CEO of the airline holding company, Luis Gallego, has ruled out further capital increases . Outside of the selective, Naturhouse rises more than 3%, after presenting results .
Fat week of central banks
The European stock markets start off on the wrong foot a week that could be decisive. The central banks of Sweden, Norway, Switzerland, the United Kingdom, Japan and the United States meet this week and although it is almost probable that there will be no major decisions, the appointments take on special relevance pending some clue about the withdrawal of stimulus. The possibility of the start of tapering by the Fed has marked the evolution of the stock markets in recent weeks.
By the end of the week, the PMIs for September in the main economic powers will be decisive. The slowdown is another issue that worries the market. It will be a good time to find out if the recovery ceiling has already been reached in Europe.
For its part, oil does not escape the falls in the commodity market. Brent and Texas are down almost 2%, standing at $ 73 and $ 70, respectively. The euro is heading for the month’s lows against the dollar, trading at 1.17 units.