Australia

The ASX is set to fall as global stocks sell off over debt fears in China’s property market. Iron ore falls past $US100.

The Australian SPI 200 futures contract was down 98 points or 1.4 per cent at 7,118 near 8.00 am Sydney time on Tuesday, suggesting a negative start to trading.

Worries about spreading contagion from troubles in China's property market sent US stocks toward their steepest declines in months.

Losses for the major US indexes accelerated midday, then reversed in the final hour of trading. The Dow Jones Industrial Average dropped 1.8%, dragged down by shares of Caterpillar and financial heavyweights like Goldman Sachs. The S&P 500 dropped 1.7%. The Nasdaq Composite Index fell 2.2%, after being down more than 3% earlier in the afternoon.

The retreat came amid concerns over property developer China Evergrande Group. Market participants increasingly believe that Beijing will let Evergrande fail and inflict losses on its shareholders and bondholders. The company's debt burden is the biggest for any publicly traded real estate management or development company in the world.

The Australian dollar was buying 72.51 US cents near 7.00am AEST, down from the previous close of 72.67. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, rose to 87.81.

Locally, the S&P/ASX 200 closed 2.1% lower at 7248.2, a three-month low, driven by pressure on miners. Almost all sectors finished the day in the red, with only utilities stocks eking out a 1.0% gain.

Materials stocks suffered the heaviest losses amid continued pressure on iron-ore prices. Fortescue shed 3.7%, while Lynas Rare Earths gave up 12.0% and Bluescope lost 5.0%. The energy sector fell 3.0%, with Whitehaven Coal down 4.8% and Ampol losing 3.6%.

Australia's major banks were down between 2.0% and 2.2%.

In further bad news for iron ore, broker Morgans estimates that to achieve flat steel production in 2021, China's monthly output would need to fall more to average 81.9 million tons over the remaining four months. That is the equivalent of another 32 million tons of lost iron-ore demand.

Power distributor AusNet Services said Monday it intends to recommend shareholders accept a $9.58 billion takeover proposal from Brookfield Asset Management Inc.

Gold futures rose 0.7% to $US1763.80 an ounce; Brent crude was down 1.9% at $US73.92 a barrel; Iron ore was down 8.8% to $US92.98.

The yield on the Australian 10-year bond was flat to 1.30%; The yield on the US 10-year note fell to 1.308%.

Asia

Markets in mainland China and Japan were closed for holidays on Monday.

In Hong Kong stocks ended the session sharply lower. The benchmark Hang Seng Index slid 3.3%, its largest one-day loss since late July, to settle at 24099.14, the lowest closing in nearly a year.

Hong Kong developers led declines, as investor worries over the sector spread from Chinese companies to Hong Kong. The fears were triggered by a Reuters report that officials have asked the city's property tycoons to back Beijing's interests. Henderson Land, New World Development and Sun Hung Kai Properties all plunged more than 10%.

Europe

The FTSE 100 closed down 0.79% on Monday as stock markets globally were hit by a wave of selling, with further short-term losses expected.

"It is definitely a 'sea of red' kind of day for global markets, the first time that phrase has been used for quite a while," IG Group PLC's chief market analyst Chris Beauchamp says. Growth stocks in particular have been hit hard, and those with any Chinese connection have been at the forefront, Mr. Beauchamp says.

European markets also dropped Monday amid concerns about the potential wider economic impact of a cash crisis engulfing Chinese property developer Evergrande. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, was down 1.6%.

North America

Worries about spreading contagion from troubles in China's property market sent US stocks toward their steepest declines in months on Monday.

Losses for the major US indexes accelerated midday, then reversed in the final hour of trading. The Dow Jones Industrial Average dropped 1.8%, around 614 points, dragged down by shares of Caterpillar and financial heavyweights like Goldman Sachs. The S&P 500 dropped 1.7%. The technology-focused Nasdaq Composite Index fell 2.2%, after being down more than 3% earlier in the afternoon.

The moves snapped an extended stretch of calm for major indexes. The S&P 500 hasn't fallen more than 1% since Aug. 18, when it fell by just under 1.1%. All three major indexes are down around 4% this month.

"It's a surprise Monday open," said Zhiwei Ren, a portfolio manager at Penn Mutual Asset Management. "We are definitely being a little more cautious at this point."

The declines were broad-based, with all 11 of the S&P 500 sectors recording declines. The retreat came amid concerns over property developer China Evergrande Group. Market participants increasingly believe that Beijing will let Evergrande fail and inflict losses on its shareholders and bondholders. The company's debt burden is the biggest for any publicly traded real estate management or development company in the world.

"This is a company based in China whose activities are overwhelmingly centered in China. That being said, we always are monitoring global markets, obviously from the Department of Treasury primarily, including the assessment of any risk to the US economy and stand ready to respond appropriately if needed," White House press secretary Jen Pskai said, referring reporters to the Treasury Department.

The concerns over Evergrande struck as investors had already grown more cautious about the outlook for stocks, after a booming rally for much of the year. Money managers have said valuations look elevated and pointed to signs that the economic recovery in the US has lost steam amid the spread of the Delta variant of the coronavirus.

Some analysts say that major US indexes were due for a pullback after a nearly relentless dash for records. For much of the summer, individual and institutional investors piled into the stock market, helping send the S&P 500 to more than 50 fresh highs this year. Market volatility was low.

The mood shifted in September. Many investors were bracing for more volatility in the autumn months, and some on Wall Street said that they were forecasting lackluster returns through the rest of the year. Analysts at firms including Citigroup, Deutsche Bank and Bank of America published notes this month cautioning about risks in the US stock market while others said they expected economic growth to soften.

Some forecasts have grown even darker. Morgan Stanley strategists warned on Monday about the growing likelihood of more than a 20% decline in the S&P 500.

Investors have been grappling with a number of risks, including slowing economic growth as the Delta variant has spread alongside higher inflation. This week, investors will be closely tracking the Federal Reserve's monetary policy meeting.

"Investors are really unsure which way to turn right now," said Johan Grahn, head of ETFs at Allianz Investment Management.

Shares of energy and financial companies were among the worst performers on Monday, and companies in sectors that are exposed to China's resource-hungry economy experienced big declines. Anglo American dropped more than 5% and Freeport-McMoRan lost around 7%.

Shares of Invesco fell around 9% in recent trading. Goldman Sachs shares dropped roughly 4.2%.

And the Russell 2000 index of small companies fared even worse than other major indexes, sliding 2.7%.

The uncertainty surrounding global growth and more volatility in the fall months has triggered many investors to turn to the options market to hedge against bigger swoons in stocks, traders and analysts say. The Cboe Volatility Index, a gauge of expected swings in the S&P 500, rose to 26.59.

Hong Kong-listed shares of Evergrande, which said Sept. 13 it was facing unprecedented difficulties, tumbled more than 10% to their lowest closing level in a decade.

"Everyone is looking at Evergrande and saying 'has the time come for a major default in that area, and then the potential for contagion into the broader property sector?'" Mr. Park said. "It's an imminent risk now rather than being a theoretical risk as it has been for the past few years."

China's leaders are pushing Evergrande and other real-estate companies to reduce their debts, as they try to tame the mainland's housing markets after years of runaway growth. A domestic bank loan repayment is due by Evergrande on Monday, with a 24-hour grace period, according to Deutsche Bank strategists. Payments on domestic and dollar bonds are due Thursday.

"When you have the combination of worries like you have today -- deleveraging, Evergrande, the internet sector -- then you get more volatility," said Frank Benzimra, head of Asia equity strategy at Société Générale.

Some analysts said that they did not expect Evergrande's financial woes to trickle into other parts of the world, and that the stock-market selloff would be short-lived. Mr. Benzimra said Evergrande was unlikely to lead to a "Lehman moment" akin to the financial shocks that followed the collapse of Lehman Brothers in 2008.

JPMorgan analysts said in a note on Monday that the market sell-off was exacerbated by technical factors such as options hedging as well as poor liquidity. They considered Monday's selloff an "overreaction."

"Our fundamental thesis remains unchanged, and we see the sell-off as an opportunity to buy the dip," wrote a team led by JPMorgan's Marko Kolanovic in a note Monday.