【Market Evening】Asian markets down as Evergrande risks, Oil rises 1%, Gold prices flat

Gold edges lower on Fed meeting jitters; Evergrande woes limit losses

Spot gold prices were flat on Tuesday as investors adopted a risk-averse stance amid caution ahead of U.S. Federal Reserve’s policy meeting where the central bank is expected to provide cues on when it will begin tapering its asset purchases.

Bullion is considered as a hedge against inflation and currency debasement likely resulting from the widespread stimulus. A hawkish move by the Fed would diminish gold’s appeal, while an eventual interest rate hike would also raise the opportunity cost of holding the non-interest bearing asset.

Spot gold rose 0.09% to $1765.37 per ounce and spot silver rose 1.22% to $22.55 per ounce by 17:30(GMT+8).

Worries about the fallout from property developer Evergrande’s solvency issues spooked financial markets and lifted the US dollar index, which hit a near one-month peak on Monday. A firmer dollar generally makes bullion more expensive for other currency holders.

Fed is likely to provide an outlook on how soon and how often they think the economy will need interest rates rises over the next three years when they release new forecasts at their policy meeting on Wednesday.

The volume of the European Central Bank’s bond purchases is becoming “less important” as the economic outlook improves and the money-printing scheme becomes a tool for guiding rate expectations, ECB board member Isabel Schnabel said on Monday.

Russia’s gold reserves stood at 73.8 million troy ounces as of the start of September, the central bank said on Monday.

Dollar slips from one-month high as equity futures bounce

The U.S. dollar stepped back from a one-month high tested overnight as equity market futures moved higher on Tuesday, while investors, bracing for a potential default by property developer China Evergrande, sought safety in the yen.

Default fears continued to stalk China Evergrande Group despite efforts by its chairman to lift confidence in the embattled property company. Financial markets looked for possible intervention by Beijing to stem any domino effects across the global economy.

“With no signs of a possible solution on the horizon, we see the case for the default risks to continue growing and keep adding pressure to the broader risk appetite,” said Charalambos Pissouros, head of research at JFD Group.

Against a basket of its rivals, the dollar steadied at 93.190 after reaching its highest since Aug. 23 at 93.45 in the previous session. U.S. equity futures were up 1%.

Before Evergrande’s debt crisis unnerved markets, the dollar has been supported ahead of a Federal Reserve meeting this week, where economists in a Reuters poll expect policymakers to signal expectations of a tapering plan to be pushed back to November.

Defying the risk-averse mood, the Australian dollar rallied 0.4% to $0.7278, rebounding with oil prices after dipping to $0.72205 in the previous session for the first time since Aug. 24.

Oil rises 1% as U.S. storm aftermath tightens supply

Prices had recovered on Monday from an over one-month low on safe-haven demand as China’s Evergrande debt woes fueled sharp sell-off in stocks worldwide.

Brent crude oil price rose 0.98% to $74.19 a barrel while U.S. West Texas Intermediate crude oil price was at $70.97 a barrel, up 0.91% by 17:30(GMT+8).

Global utilities are switching to fuel oil due to rising gas and coal prices, and lingering outages from the Gulf of Mexico after Hurricane Ada that imply less supply is available, ANZ analysts said.

"While slowing Chinese economic growth and uncertainty around the (U.S.) Fed's tapering timetable weighed on market sentiment, other developments still point to higher oil prices," ANZ Research said in a note.

Still, investors across financial assets have been rocked by the fallout from heavily indebted Evergrande and the threat of a wider market shakeout in the longer term.

"Evergrande's woes are threatening the outlook for the world's second-largest economy and making some investors question China's growth outlook and whether it is safe to invest there," said Edward Moya, senior market analyst at OANDA.

While that view of the state of China's economy is weighing on markets, the U.S. Federal Reserve is also expected to start tightening monetary policy - likely to make investors warier of riskier assets such as oil.

Asia stocks mixed as investors weigh China concerns

Asian stocks were mixed on Tuesday as concerns persisted over Chinese property group Evergrande and its impact on the global markets.

Nikkei 225 fell 2.17% to 29,839.71.

S&P/ASX 200 rose 0.35% to 7,273.80.

Hang Seng Index rose 0.51% to 24,221.54.

There are concerns that Evergrande - a major Chinese property developer - is struggling to meet interest payments on more than $300bn of debts.

Regulators have warned it could affect the country's financial system.

Investors fear that this could hit big banks exposed to Evergrande and companies like it, causing contagion in global markets.

The jitters among the markets also come as the global economy is still recovering from the impact of the coronavirus.

"The fear of an Evergrande bankruptcy appears to be leading to concern about China's very own Lehman [Brothers] moment, and a big overspill across the region," said Michael Hewson of CMC Markets.

Investors are also nervous that the US Federal Reserve, which meets on Tuesday and Wednesday, will confirm plans to cut back support for the US economy this year.

However, other analysts played down fears of a rout, noting that September is typically a bad months for stocks.

"Overall, September continues to live up to its bad reputation as historically the weakest month of the year. But that doesn't mean it can't rebound," said JJ Kinahan, chief market strategist at TD Ameritrade.

And Lindsey Bell of Ally Invest said any pullback may be short-lived.

"Much of investing is about sorting through what's signal and what's noise," she said. "While there is concern about the Evergrande situation infecting global markets, for the long-term investor, this situation may just be noise."