European Markets Pressured, US Futures Float Lower

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Principal Points

• European equities opened Friday action to the downside after several days of solid gains
• US stock futures kept below the flat line in pre-market trading on Wall Street today

European Shares Slide Broadly on Friday

Stocks in Europe opened Friday’s session with declines across the board. Investors in the old continent appeared risk-averse in the early hours of trading as the Evergrande situation remains a risk.

The pan-continental Stoxx Europe 600 declined half a percent in the initial moments of the session. Later, selling pressure increased and the benchmark slipped lower to a daily decline of 0.8%. Major stock gauges across the bloc were also in the red.

The London-based FTSE100 dropped 0.3%, while Germany’s DAX tumbled 0.7%. The CAC40 in Paris declined more than 0.8%, and Spain’s IBEX35 was fairly flat.

Traders and investors in Europe are aiming to balance the risks and opportunities in a time of heightened uncertainty. On that note, money managers are largely unaware of how a potential collapse of Chinese real-estate developer Evergrande could affect their market exposure.

Investors Fear Evergrande’s Collapse Could Affect Banks in Europe

In efforts to soothe investor fears, European banks have been reassuring they have limited exposure to the Chinese company that faces insolvency due to its inability to pay $300bn in debt. The large-cap developer increased the chances for default as it missed a crucial deadline yesterday. Evergrande had to pay $83.5 million in interest, which the company still has not done. In an interview with CNBC on Thursday, European Central Bank President Christine Lagarde spoke about the situation in China. “We are looking at it,” Ms. Lagarde commented. “We are monitoring and I had a briefing earlier on today because I think that all financial markets are interconnected.”

“I have very vivid memories of the latest stock market developments in China that had a bearing across the world. But in Europe and the euro area, in particular, direct exposure would be limited,” she added.

US Futures Decline Ahead of the Bell in New York

Stateside on Friday, US futures hover moderately in the red ahead of the bell today. Futures contracts tied to the Dow Jones Industrial Average were lower by about 0.2%. S&P500 futures and Nasdaq futures were down about 0.3% each.

Stocks on Wall Street staged a sharp rebound on Thursday as investors jumped to build on Wednesday’s gains. The Dow added more than 500 points yesterday to its best two-day rally since March. The S&P500 gained over 1.2%, while the tech-heavy Nasdaq Composite added 1%.

Besides the Evergrande contagion fears, market participants had a lot to digest this week. The US Federal Reserve announced it is considering tightening monetary policies in November. If the economic recovery continues to progress, Fed Chair Jerome Powell said, the US central bank could “easily” unwind its $120bn in monthly purchases at the November policy meeting.

Bitcoin Pulls Back from Daily High

Cryptocurrencies trade fairly flat today as the market appears reluctant to take oversized risks heading into the weekend. Bitcoin climbed near $45,000 earlier in the session but later slipped to levels near $43,000 per coin.