European stock markets push higher as Evergrande fears ease

·3 min read
Evergrande Center building in Shanghai, China
The real estate company said a payment due on Thursday, for an onshore renminbi-denominated bond, had 'already been resolved through off-exchange negotiations'. Photo: Hector Retamal/AFP via Getty Images

European stock markets were sharply higher on Wednesday as worries over the Evergrande crisis in China started to ease.

The real estate company said a payment due on Thursday, for an onshore renminbi-denominated bond, had “already been resolved through off-exchange negotiations.”

Traders are hopeful that the company might reach an arrangement with its international bondholders.

Overnight, China’s central bank also injected 120bn yuan (£13.6bn, $18.55bn) into the banking system to strengthen the financial system amid concerns over the debt crisis at Evergrande.

In London, the FTSE 100 (^FTSE) closed up more than 1.4%, while the CAC (^FCHI) climbed 1.3% in Paris and the German DAX (^GDAXI) was almost 1% higher.

Mining stocks were among the top FTSE risers on the back of the news, including Antofagasta (ANTO.L), Anglo American (AAL.L), and BHP Group (BHP.L).

They had declined earlier in the week, on concerns that Evergrande’s debt default would hurt the wider Chinese economy, cutting demand for copper, iron ore, coal and other commodities.

Read more: Here's the biggest risk from the Evergrande crisis, says Goldman Sachs

"A series of temporary fixes to ominous global problems has pushed the FTSE 100 back over the psychologically important 7,000 mark but there’s a chance the nuts and bolts may weaken again, and the wheels could fall off the recovery," Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.

"The deal to settle a domestic bond payment due to be made by the crisis hit Chinese property group Evergrande, seems to have calmed nerves among investors and stopped immediate contagion to other sectors."

Across the pond, the S&P 500 (^GSPC) rose 1.1% and the tech-heavy Nasdaq (^IXIC) was 1% higher at the time of the European close. The Dow Jones (^DJI) surged more than 1.2%.

Later today all eyes will be on the Federal Reserve’s interest rate decision. The US Federal Open Markets Committee (FOMC) will also be giving its latest economic projections and the ‘dot plot’ of expected future rate hikes.

Watch: What are negative interest rates?

“Investors will be looking to determine whether recent events around surging energy prices, and Evergrande, have altered the prevailing narrative, that until a week ago, had been very much that this meeting was a waypoint on the way to the September payrolls number, which is due on October 8th,” said Michael Hewson at CMC Markets.

“A decent number in October would more or less set in motion a timeline to the start of a tapering of asset purchases in either December or January.”

Before the August payrolls report there was a widespread expectation that the Fed meeting would be an opportunity for the US central bank to signal the start of just such a program of reducing the amount of its $120bn (£88bn) a month bond buying program.

Asian markets were mixed overnight, with the Hang Seng rising (^HSI) 0.5% and the Shanghai Composite (000001.SS) up 0.4%. However, in Japan, the Nikkei (^N225) slipped 0.7%.

“The latest announcement just proves Evergrande and the government’s efforts to stabilise the situation and prevent defaults,” said Bruce Pang, head of research at investment bank China Renaissance.

Watch: Evergrande worries global investors 'sheerly because of its size'

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