Global Markets

Sinking ore prices hit ArcelorMittal hard, driving European stocks weaker

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European stock markets fell strongly on Monday, owing to fears about the health of property behemoth China Evergrande Group and ahead of this week’s critical Federal Reserve meeting. At 3:40 a.m. ET (0840 GMT), the DAX in Germany was down 2% after the number of members was increased to 40 from 30, while the CAC 40 in France was down 1.9 percent and the FTSE 100 in the United Kingdom was down 1.3 percent.

Several central banks will convene this week, including the Bank of England, the Bank of Japan, and the Swiss National Bank, but the attention will be on the Federal Reserve, which may take another step toward tapering at its two-day meeting beginning on Tuesday. Investors will be watching to see if the Fed believes the US economy is robust enough to begin lowering the large amount of monetary support it has provided during the crisis, though the belief is that an official announcement will be delayed until the November or December meetings.

Back in Europe, falling commodity prices have taken a heavy toll on energy and mining companies, with Royal Dutch Shell (LON: RDSa) down 1.2 percent, Total Energies (PA: TTEF) down 1.1 percent, Anglo American (LON: AAL) down 5.9 percent, and ArcelorMittal (NYSE:MT) down 5.2 percent. In other news, Lufthansa (DE: LHAG) surged 2.7 percent despite the German airline announcing a capital increase to repay a portion of a state bailout it received during the coronavirus crisis. Investors interpreted the management team’s decision as a vote of confidence.

Earlier Monday, the Hang Seng index in Hong Kong fell more than 3%, led down by continued dumping of shares in Chinese property company China Evergrande Group (HK:3333). With a bond interest payment due on Thursday and mounting concerns that a failure on its $300 billion in liabilities might crystallize broader vulnerabilities in China’s financial system, investors appear to be pessimistic about its prospects. Crude prices plummeted as supply grew in the United States, the world’s top consumer. Baker Hughes reported on Friday that the country’s oil and gas rig count increased by nine to 512 in the week ending September 17, the highest level since April 2020 and more than double the level at this time last year.

Furthermore, only 23% of US Gulf of Mexico crude output remained offline as of Friday, down from 28% on Thursday, more than two weeks after Hurricane Ida hit. Ahead of the Fed meeting, the dollar rose to a month high, making commodities priced in the currency more expensive. By 3:40 AM ET, U.S. crude futures traded 1.3% lower at $70.88 a barrel, while the Brent contract fell 0.8% to $74.72. Additionally, gold futures rose 0.1% to $1,752.95/oz, while EUR/USD traded 0.1% lower at 1.1711.