In another development, ratings agencies say Evergrande Group, one of China’s biggest real estate developers, looks increasingly likely to default on its debts following news reports it will delay interest payments on bank loans. The company is selling assets to raise cash and faces complaints it is late in paying contractors and in delivering projects to customers.
Ratings agencies Moody’s and Fitch cut their ratings on Evergrande debt this week to a level that indicates they believe the company is likely to default on bond payments due to lack of cash. Chinese authorities are trying to reduce high debt levels in the economy and have urged Evergrande to resolve its more than $300 billion in debt, but financial analysts to suggest they might allow a default while trying to reduce its impact on the financial system.
Tokyo’s Nikkei 225 fell 0.5% to 30,031,67. In Hong Kong, the Hang Seng lost 1.2% to 26,003.25, while the Shanghai Composite index edged 0.2% lower, to 3,669.74. In Sydney, the S&P/ASX 200 declined 1.2% to 7,424.20. Shares rose in Singapore, Malaysia and Indonesia.
The yield on the 10-year Treasury note fell to 1.33% after rising sharply on Tuesday to 1.37%.
On Wall Street, the S&P 500 slipped 0.1%, its third straight drop. The benchmark S&P 500 was roughly split between gainers and losers, but weakness in technology, communication and financial stocks weighed down the market. Less risky investments, including consumer staples and utilities, made broad gains.
Small-company stocks fell more than the broader market. Bond yields were mixed. Oil prices rose.
The Federal Reserve’s latest survey of the nation’s business conditions, dubbed the “Beige Book,” said U.S. economic activity “downshifted” in July and August.
The Fed said the slowdown was largely attributable to a pullback in dining out, travel and tourism in most parts of the country, reflecting concerns about the spread of the highly contagious delta variant.
The S&P 500 fell 5.96 points to 4,514.07, which is 0.5% below the all-time high the index set last Thursday. The Dow Jones Industrial Average fell 0.2%, to 35,031.07, and the Nasdaq composite slid 0.6% to 2,249.73. The tech-heavy index’s decline ended a four-day winning streak.
The Russell 2000 index of smaller companies lost 1.1%, to 2,249.73.
Investors could be in for a choppy market through September as they monitor the Federal Reserve and Washington, which has to deal with budget reconciliation, infrastructure spending and the debt ceiling.
On the bright side, U.S. employers posted record job openings for the second consecutive month in July, according to the Labor Department. The disconnect between the growing number of job openings and the weak recovery for employment levels suggests the jobs issue could be crimping the broader economic recovery.
The latest Beige Book will be used by Fed policymakers at their next meeting on Sept. 21-22 to help them decide how to move interest rates and whether to end the $120 billion monthly bond purchases the central bank has been making since the pandemic started, to help lower long-term interest rates.
Also Wednesday, shares of cryptocurrency trading platform Coinbase fell 3.2% after the company disclosed it was being investigated by the Securities and Exchange Commission over its plans to offer its cryptocurrency holders a chance to earn interest on their assets if they lend them out. The company said the regulator has threatened to take civil enforcement action, and the launch of the lending program has been delayed until at least October.
In other trading, benchmark U.S. crude oil rose 5 cents to $68.35 per barrel in electronic trading on the New York Mercantile Exchange. It gained 95 cents on Wednesday, to $69.30 per barrel.