Wall Street rises despite Chinese warnings of “Evergrand Storm”


US stocks jumped for a second day in a row, Thursday, as concerns about a crisis in the Chinese real estate market eased somewhat as the Federal Reserve kept its current monetary stimulus for a little longer.

The Dow Jones Industrial Average rose 452 points, or 1.3%, while the Standard & Poor’s rose 1.1% and the Nasdaq 0.9%.

Shares linked to the global economic recovery were higher. General Electric rose 3%, Las Vegas Sands, which has significant exposure to China, added 2%, and Caterpillar added 4%. Energy stocks also rose.

Also, banking stocks rose as Treasury yields rose, JPMorgan, Bank of America and Citibank rose 2% while regional banks gained more than 3%.

Hong Kong’s index rebounded more than 1% from losses this week with shares of Chinese property developer Evergrande Group rising more than 17%, with the company allaying concerns a bit by resolving payments on local bonds.

But global investors are still waiting to see if the company will pay $83 million in interest on US dollar-denominated bonds. Bloomberg, citing a source, reported that government regulators have instructed Evergrande to avoid defaulting on dollar bonds in the near term.

Meanwhile, the Wall Street Journal reported that the Chinese government is asking local authorities to prepare for a possible storm if Evergrande fails.

Storm “Evergrand”

Chinese authorities have asked local officials to prepare for the possible bankruptcy of debt-laden property developer Evergrande, the Wall Street Journal reported Thursday.

Local officials described signals from Chinese authorities as “preparing for a potential storm” and said the government told them they should intervene only at the last minute to prevent spillovers from the demise of the Evergrande, the Wall Street Journal reported.

The report notes that the central government’s appetite may still be limited to save the company, despite the global repercussions. Concerns about Evergrande’s inability to make interest payments have grown in recent weeks and were seen as one of the reasons for the worldwide market sell-off on Monday.

The company decided to repay the local bonds on Wednesday, which helped boost Asian markets. However, it is not clear whether the company will pay the interest due Thursday on its overseas bonds.

Bloomberg reported Thursday that authorities in Beijing had asked the company not to default on interest payments denominated in dollars.

unemployment benefits

In addition, the Labor Department reported that initial jobless claims rose last week as the US labor market continues to recover from last year’s recession. There were 351,000 claims last week, beating estimates of 320,000. The previous week’s reading came in at 332,000.


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