A degree of certainty from the Federal Reserve that it will begin tapering its stimulus later this year trumped ongoing skittishness over the Evergrande credit risk in China Thursday.
U.S. stock market indices all rose sharply Thursday, putting stocks on pace for a second-straight day of gains as investors remained upbeat that trouble with property giant China Evergrande Group can be contained.
The Dow 30 was up 1.66%, the Russell 2000 rose by 2.06%, and S&P 500 gained 1.5% in afternoon trading, a day after a Federal Reserve policy update sent the S&P 500 to its biggest one-day gain since July.
However, The Wall Street Journal and The Financial Times continued to publish stories warning of deepening worries in the bond market over Evergrande's debt. FT said that the Evergrande bond, on which the interest payment is due today, was trading at 28 cents on the dollar.
$428 Billion Corner of the Asian Debt Market
"Deepening worries over Evergrande have ignited selling in a $428 billion corner of the Asian debt market, underscoring how the crisis at the Chinese property-developer is spreading to other assets, as traders and investors brace for a crucial payment deadline on Thursday," FT writes.
Should Evergrande default on its debt, it will lead to China's biggest-ever debt restructuring and could prompt bond traders who have gone out further on the yield curve to riskier assets - such as Evergrande - to possibly pull in the reigns.
It would be "naive to think that the turmoil in the [property] market doesn't have the potential to have second-order and third-order impact...particularly on the capital markts and the bond markets," said Noel Quinn, chief executive officer of HSBC, speaking at a Bank of America conference on Wednesday.
Calling China an emerging market, FT notes that Beijing has been cracking down on Chinese property developers, which have been the main issuers of dollor-denominated high-yield debt in Asia.
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