Wall Street has suffered its sharpest drop since May as the S&P 500 fell 1.7 per cent, and the Dow Jones Industrial Average closed down 614 points, or 1.8 per cent.
The tech-focused Nasdaq also fell 2.2 per cent in a wild day of trading sparked by a number of emerging risks, including the prospect that one of China’s largest property developers may default on hundreds of billions of dollars of debt.
Investors are worried that China Evergrande Group’s problems may cause a ripple effect through financial markets — the Hang Seng index dropped four per cent as default looms for the company
The Evergrande Group is the most debt-laden property developer in the world, with liabilities in excess of $300bn. Earlier in September, it warned that it could not keep up with its obligations to lenders, investors, and suppliers.
Construction on many of the company’s projects has halted and there are mounting concerns that its failure could lead to a broader crisis in the Chinese real estate sector, which is an important economic engine for the country.