Safe haven demand to soarGold could hit USD 2,000 oz this...

Safe haven demand to soar
Gold could hit USD 2,000 oz this year.

The global stock rout sparked by investor angst over China’s real-estate sector and Federal Reserve tapering worsened on Monday, with U.S. stocks falling more than 1% and European equities tumbling the most in almost a year.

The S&P 500 fell the most on an intraday basis in a month, a test for the buy-the-dip mentality as the gauge jabs at its 50-day moving average. The benchmark index is still up around 17% this year. Treasuries gained along with the dollar before Wednesday’s Fed meeting, where policy makers are expected to start laying the groundwork for paring stimulus.

“While the Evergrande situation is front and center, the reality is, stock market valuations are overstretched and the market has enjoyed too long of a break from volatility,” said David Bahnsen, chief investment officer at Newport Beach, California-based wealth management firm The Bahnsen Group.

The Stoxx Europe 600 index dropped more than 2% to a two-month low and was on track at one point for the biggest decline since October 2020. Raw materials led the broad-based retreat as iron ore extended a slump below $100 a ton and base metals declined after China stepped up restrictions on industrial activity. Germany’s DAX underperformed as a rebalancing takes effect.

Hong Kong shares slumped amid the biggest selloff in property stocks in more than a year as traders tracked the risk of contagion from the debt crisis at developer China Evergrande Group, which is fueling new fears about China’s growth path.

Aside from Evergrande and the prospect of reduced Fed stimulus, financial markets also face risks from uncertainty over the outlook for President Joe Biden’s $4 trillion economic agenda as well as the need to raise or suspend the U.S. debt ceiling. Investors were already fretting over a slowing global recovery from the pandemic and inflation stoked by commodity prices.