Markets feel the pressure after Evergrande executives detained over creditor repayment
|The stock market is currently navigating a landscape overshadowed by a significant influx of risk-averse news with these developments spanning a wide spectrum, from the persistent turmoil in China's real estate market, exemplified by Evergrande's default, to the worrisome trajectory of China's developers' index, which has extended its decline, reaching levels not witnessed in nearly nine months. These events have raised profound concerns regarding the immense debt burden within the sector and the potential long-term implications for China's economic growth. Adding to the complexity is the detention of Evergrande executives due to their failure to meet creditor obligations. This further exacerbates the uncertainty surrounding the real estate giant and its ripple effects on the broader financial landscape which could cause a domino effect across global markets.
Will the US federal budget cause a government shutdown?
Simultaneously, there's the looming specter of another political crisis stemming from a controversy surrounding the federal budget. While the prospect of a U.S. government shutdown isn't entirely novel, having occurred 18 times before 1977, it carries the potential to exert a negative impact on economic growth. Moreover, it could result in delays in the release of crucial macroeconomic data, with estimates suggesting that each week of such a shutdown could lead to a 0.15% contraction in GDP. Moody's, a prominent credit rating agency, has also signaled that such a scenario could be linked to a downgrade of the United States' credit rating which further resonates with the arguments that prompted Fitch to downgrade the U.S. to AA+. In any case, this news could cause a further destabilization of current market sentiment as investors are still trying to predict upcoming decisions from central banks amid unclear data.
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