Shares
 
FAQs

Visit our FAQ page to find the answers to the most commonly asked questions, including how to create an account, explaining ETFs, and providing useful links, forms, and tables.

FAQs
Shares

Start investing in Australian shares the smart way. Discover ThinkTrader today.

Open Shares Account
Learn To Trade
 
Indicators & Chart Patterns

Deepen your knowledge of technical analysis indicators and hone your skills as a trader.

Find your detailed guides here
Trading Glossary

From beginners to experts, all traders need to know a wide range of technical terms. Let us be your guide.

Learn more
Knowledge Base

No matter your experience level, download our free trading guides and develop your skills.

Learn more
Learn To Trade

Trade smarter: boost your skills with our training resources.

Open CFD Account
Market Analysis
 
Market News

All the latest market news, with regular insights and analysis from our in-house experts

Learn more
Economic Calendar

Make sure you are ahead of every market move with our constantly updated economic calendar.

Learn more
Technical Analysis

Harness past market data to forecast price direction and anticipate market moves.

Learn more
Live Webinars

Boost your investing knowledge with our live, interactive webinars delivered by industry experts.

Register now
Special Reports

Engaging, in-depth macroeconomic analysis and expert educational content from our in-house analysts

Learn more
Market Analysis

Harness the market intelligence you need to build your trading strategies.

Open CFD Account
Partnership
 
Money Manager

Increase your income and get compensated for your trading knowledge with ThinkInvest, putting you in control.

Learn more
API Trading

Create your own trading platform or data tools with our cutting-edge APIs.

Learn more
Introducing Broker

ThinkMarkets ensures high levels of client satisfaction with high client retention and conversion rates.

Learn more
White Label

We supply everything you need to create your own brand in the Forex industry.

Learn more
Regional Representatives

Partner with ThinkMarkets today to access full consulting services, promotional materials and your own budgets.

Learn more
Partnership

Plug into the next-gen platforms and the trades your clients want.

Open CFD Account
About ThinkMarkets
 
Liverpool FC Sponsorship

ThinkMarkets is the Official Global Trading Partner of Liverpool FC

Learn more
About Us

Find out more about ThinkMarkets, an established, multi-award winning global broker you can trust.

Learn more
Negative Balance Protection

Trade with peace of mind. Never lose more than what you deposited, no matter what the market conditions.

Learn more
Careers

Discover a range of rewarding career possibilities across the globe

Apply now
Trading Infrastructure

When it comes to the speed we execute your trades, no expense is spared. Find out more.

Learn more
ThinkMarkets News

Keep up to date with our latest company news and announcements.

Learn more
Contact Us

Our multilingual support team is here for you 24/7.

Learn more
About ThinkMarkets

Global presence, local expertise - find out what sets us apart.

Open CFD Account
Create account

Stocks plunge on Evergrande

Fawad Razaqzada Fawad Razaqzada 20/09/2021
Stocks plunge on Evergrande Stocks plunge on Evergrande
Stocks plunge on Evergrande Fawad Razaqzada
  • Evergrande contagion threat hits financial markets
  • Inflation concerns additional risk
  • Central bank meetings: FOMC Wednesday and BoE Thursday
  • Data: Global PMIs Thursday
European stocks and US index futures remained deeply in the red during the European morning session, with the major indices being about 2% or more lower after a 3% drop for the Hang Seng overnight. US markets looked set to open with big gaps, which could lead to further panic selling. With risk appetite falling, cryptocurrencies, crude oil, copper and all major risk-sensitive currencies suffered.

marketsSource: ThinkMarkets and TradingView.com
 
Chief among investor worries has been Evergrande’s debt woes and its potential spillover on other property developers, lenders and other sectors – not only in China, but elsewhere too. Investors are not sure whether Chinese authorities will be able to contain the fallout from a possible disorderly collapse of the heavily indebted company. The situation is made worse by the fact China will be closed in observance of the Mid-Autumn Festival until Wednesday. But Evergrande’s Hong Kong listed shared fell a further 13% as its market cap dropped to its lower ever level as a potential bankruptcy looms large. The company was due to pay interest on bank loans on Monday and some $83.5 million in interest on Thursday for its offshore March 2022 bond. Failure to make these payments will mean default, which appears likely as Chinese authorities have apparently already told major lenders not to expect repayment.
 
If the problems ended with Evergrande then there wouldn’t be too much of an issue as far the wider financial markets are concerned. But this could have repercussions on many other companies. So, the contagion risks may be much wider than the markets currently expect. Equally, a lot depends on how China’s authorities will respond to this crisis. Will they bail the company out, or let it collapse and make an example of it? China is also cracking down heavily on other key sectors in the economy, providing additional uncertainty hanging over the Chinese markets and economy.

Will Wall Street traders buy the dip?

Given the huge uncertainty, investors are unwilling to take any risks and we have seen the impact of that on the markets already so far today. Will the Wall Street open help to lift the mood remains to be seen. Here, investors are concerned about the risks of surging inflation undoing the recent strong economic recovery, just as the Fed and other major central banks are about to reduce their bond buying programmes.

Speaking of central banks, there will be a few major ones to look forward to this week, as the US Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank all decide on monetary policy.  We will also have a few potential market-moving data, including the latest manufacturing and services PMIs.

Inflation concerns on the rise

Inflationary pressures have risen sharply due to supply bottlenecks and rapidly rising oil, gas and electricity prices. The intense heatwave in parts of southern and eastern Europe saw demand for air condition and refrigeration rise sharply, just as lockdown measures were lifted in many parts of the region. Calmer weather meant the amount of renewable energy from wind was not sufficient. So, demand for gas has risen significantly to fuel power stations, causing gas stockpiles to fall sharply. Meanwhile, crude oil prices have remained strong owning to the OPEC’s ongoing supply curbs and stronger demand due to the global re-opening.

Will energy prices fall back?

Although crude prices fell back on Monday, it is not clear whether this was driven by the general risk-off trade or otherwise. If prices recovery and remain near recent highs then this will directly impact consumers’ disposable incomes, and indirectly lower their purchasing power through inflation. Rapidly rising energy prices in Europe has forced some factories to halt production. Rising input costs are going to squeeze manufacturers’ margins and hurt their profits. The drop in buying power of consumers will only make things worse. Against this backdrop, the stock market outlook appears uncertain to say the least.

FOMC meeting (Wednesday)

The dollar has not gone anywhere fast, although it has noticeably gained ground against some of the weaker currencies like the euro. Traders are expecting the Federal Reserve to start unwinding QE in the not-too-distant future, which could keep the greenback on the front-foot. At Thursday’s FOMC meeting, all the focus will be on any indications on how soon the US central bank will start to taper its bond buying stimulus programme. But after a weak jobs report, the Fed may decide to wait a little longer before being more open about its tapering plans.
 
Bank of England (Thursday)

Inflation has surged higher in many parts of the world as a result of the abovementioned factors. The UK’s CPI measure of inflation, for example, jumped to 3.2% year-over-year from 2.0% recorded in the previous month. It is not just headline CPI, but core CPI, RPI, PPI – you name it – everything is going up.

The pressure is thus growing on the Bank of England to act. The BoE is unlikely to hike rates at its meeting on Thursday, but what the market will be watching out for will be any noticeable change in the tone of the MPC that would suggest policy tightening is going to be imminent in the coming months.  If that’s the case, we may see a sharp rally in the pound, after the currency spent much of the summer trading in a sideways range.

Global PMIs (Thursday)

Meanwhile the recent trend of economic data from China and the US have not been great, raising fears that the economic recovery is slowing at the world’s two largest economies. European data has been somewhat better, but let’s if weakness from China will weigh on growth here, too. The upcoming PMI data should provide us with good indications about the level of economic activity. As well as keeping a close eye on the headline PMI data, it is worth looking deeper into the reports to see if the indices for prices have accelerated further. As these sub-indices will provide strong indication about future inflation, we may well see a more significant market reaction in response. Further pickup in inflation momentum will make life very difficult for central banks. They will have to tighten their policies to prevent hyperinflation risks. This will not be good news, especially for growth stocks. 
 
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

Related articles:

Week Ahead Outlook: 18 October 2021

By Fawad Razaqzada

18/10/2021

Stocks rally further as markets ignore risks

By Fawad Razaqzada

14/10/2021

Investors face testing day

By Fawad Razaqzada

13/10/2021

Helium, Uranium, Silver, Gold, Lithium...Just...

By Carl Capolingua

13/10/2021

EM FX crisis pose additional risk to equities

By Fawad Razaqzada

12/10/2021

Meet our contributors
Fawad Razaqzada
×
Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
×
Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
×
Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

Feel confident?

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Back to top