Shares of Chinese property developers continued to slide Monday as worries mounted that China Evergrande Group is moving closer to a default, signaling the potential for a wider contagion in the sector. The Chinese property giant, nursing more than $300 billion in debt, is seen as likely to default this week and analysts have warned the looming crunch has potential to shake up financial markets. The Hang Seng Mainland Properties Index plunged more than 6.0% on Monday morning, taking year-to-date losses to 33%. Evergrande fell 17% to HK$2.11, while Sunac China Holdings Ltd. slid 10% and Guangzhou R&F Properties Co. fell 7.3%. Property-management companies also tracked lower, with Country Garden Services Holdings Co. retreating 12%. The selloff has been fueled slowing sales growth and Beijing’s tight policy on the sector, which hasn’t shown any sign of letting up. Worsening liquidity conditions at Evergrande and other developers who have borrowed heavily have led to downgrades by rating firms. Evergrande, China’s largest junk-bond issuer, said last week that it had hired financial advisers, moving closer to a potential debt restructuring. Efforts by the Chinese central bank to calm market jitters seem to have done little to halt the sharp downturn among developers. It pumped 190 billion yuan ($29.38 billion) of funds into markets on a net basis over Friday and Saturday via reverse-repo operations, according to data provider Wind. The property sector’s losses have dragged the wider Hang Seng Index lower. It fell as much as 4.2% and was last 3.9% lower at 23955.18, on track for its biggest one-day percentage decline since late July.

The Swiss stock market ended the last trading day of the week with losses. The SMI fell by 0.8 per cent to 11,936 points. Among the 20 SMI stocks, there were 16 price losers and four price winners. 84.64 (Thursday: 29.79) million shares were traded. Among the individual stocks, the recently battered values from the luxury goods sector showed a small recovery. Richemont shares rose by 1.5 per cent and Swatch climbed by 3.5 per cent, making it the day's winner in the SMI. At the other end of the price list was Lonza, down 2.9 per cent at 752.80 francs. Morgan Stanley cut the stock to "Equalweight" from "Overweight", but at the same time raised the price target to 810 from 745 francs. Lonza has benefited from the demand for vaccines and therapeutic solutions since the start of the Corona pandemic. The share price has risen by 35 percent so far this year, outperforming the European sector index SXDP, which is up 14 percent. Analysts also see some of the opportunities at Lonza already priced in. However, the business model remains attractive.

European stock indices ended lower on Friday. The Stoxx Europe 600 index lost 0.9% to 461.8 points, giving up nearly 1% for the week. In Paris, the CAC 40 and SBF 120 were down 0.8% and 0.7% respectively on Friday. In Frankfurt, the DAX 30 fell 1%, while the FTSE 100 in London gave up 1.2%. Euronext lost 2% after BNP Paribas Fortis announced it had placed 2.2 million euros worth of shares at 101 euros per share. Wendel (+3.1%) announced that IHS Holding, a telecoms infrastructure company that represents one of the investment company's main holdings in the unlisted sector, had filed a registration document with the US stock market regulator, the Securities & Exchange Commission (SEC), with a view to an initial public offering in the US. Travel stocks rallied on reports that the U.K. will ease restrictions. International Consolidated Airlines, the parent company of British Airways, gained 4.9% in London and Lufthansa increased 2.6% in Frankfurt. InterContinental Hotels added 3%. ADP Group (+3.2%) saw its traffic jump in August, although it remains far from its 2019 levels. Airports managed by the group welcomed 20.1 million passengers last month. Commerzbank moved 4.4% higher, after local German media reported that U.S. private-equity group Cerberus was considering building a greater stake in the bank after the German elections later this month.

U.S. stocks fell and bond yields rose as new data on consumer sentiment was slightly below expectations, raising fresh questions about the pace of economic growth and the inflation outlook. The S&P 500 dropped 40.76 points, or 0.9%, to 4432.99, pushing the index into the red for the week. The Nasdaq Composite fell 137.96 points, also losing 0.9%, to 15043.97 and the Dow Jones Industrial Average declined 166.44 points, or 0.5%, to 34584.88. The moves in stocks and bonds show investors grappling with mixed economic data in the U.S. and China, the spread of the Covid-19 Delta variant and concerns about inflation. Options and futures were set to expire Friday in a quarterly event known as quadruple witching. More than $750 billion of single-stock options were expected to mature, according to Goldman Sachs analysts. “This is one of the larger expirations of all time,” said Charlie McElligott, a cross-asset strategist at Nomura. Dealers typically hedge against the options they buy and sell, and when they expire, the market can begin to move more as they hedge less, he said. Beyond the volatility of options trading, the market is once again looking to the Federal Reserve. Invesco jumped 5.5% to $26.25 after The Wall Street Journal reported the company was in talks to merge with State Street ‘s asset-management business. State Street fell 2.6% to $84.82. Energy company Diamondback Energy (+3.2%) announced that it could buy back up to $2 billion of its own shares under a new authorisation given by its board of directors. Lucid Group soared 8.5% after announcing that one of its electric cars, the Lucid Air Dream Edition, was now ranked as the most autonomous vehicle by the US Environmental Protection Agency (EPA), with an average of nearly 512 miles driven. Chipmaker Intel (-1%) announced Friday that it would pay an unchanged quarterly dividend of $0.3475 per share beginning in December, for an annual payout of $1.39 per share.

The ever worsening situation surrounding the Chinese real estate group China Evergrande is causing significant losses on the stock markets in East Asia at the beginning of the week. However, there is no trading on the stock exchanges in China (heartland), Japan and South Korea due to public holidays.

Treasury yields rose Friday, notching their highest levels in at least a week, ahead of the Federal Reserve’s policy meeting next week and as the University of Michigan’s latest U.S. consumer survey showed sentiment mired near decade lows. The yield on the 10-year Treasury note rose to 1.369%, compared with 1.331% at 3 p.m. Eastern on Thursday.

UBS lowers Munich Re target to 297 (299) EUR - Buy
RBI increases Andritz target to 60 (50) EUR - Buy
Stifel raises Continental target to 113 (130) EUR - Buy
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