Stocks Retreat Amid Global Sell-Off
All Eyes On China
S&P 500 futures are under significant pressure in premarket trading as traders focus on the potential collapse of China Evergrande Group, which has amassed more than $300 billion in liabilities.
Fears of another financial crisis coming out of Asia pushed global indices towards multi-week lows, but it remains to be seen whether the impact of a potential Evergrande default will have widespread consequences.
Traders are also nervous ahead of the Fed meeting, although Fed Chair Jerome Powell will likely try to calm markets and reiterate his usual dovish message on September 22.
Global Rush To Safety
The yield of 10-year Treasuries has moved away from recent highs and is trying to settle below 1.30% as traders buy U.S. government bonds to protect themselves from the potential correction in riskier markets.
The U.S. dollar is also moving higher due to its safe-haven status. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is trying to settle above the resistance at 93.40. In case this attempt is successful, it will move towards yearly highs near 93.75 which may put more pressure on stocks.
Interestingly, gold is gaining ground despite strong dollar as falling yields and demand for safe-haven assets have provided sufficient support. In this environment, gold mining stocks may rebound from yearly lows.
WTI Oil Tries To Settle Below The $70 Level
WTI oil is currently trying to settle below the support at the psychologically important $70 level as traders fear that Evergrande’s financial problems may have a notable negative impact on China’s economy and cut demand for oil.
Most other commodities are also under pressure, and the market mood is very bearish today. Premarket trading indicates that oil-related stocks will find themselves under huge pressure at the beginning of today’s trading session so traders should be prepared for fast moves.
For a look at all of today’s economic events, check out our economic calendar.