Geoffrey Smith 

Investing.com — Wall Street will recover up to one third of its losses from Monday’s sell-off, and global stocks are rebounding after their Monday decline. The oil prices reached new seven-year highs, while Europe’s gas prices are still at an all time low. A Chinese real estate developer is in default and many more are on their way. Facebook (NASDAQ 🙂 has returned online so you should not have any problems sharing the coverage of Frances Haugen’s testimony to Congress later. Pepsico (NASDAQ) has raised its guidance. Also, the ISM Non-Manufacturing Survey is due. This is what you should know about financial markets Tuesday 5 October.

1. Pepsico eyes stock recovery after tech-led fall

Global markets recovered from Monday’s tech-led sell-off, with European stock indices again profiting from rotation back into cheaper value and cyclical stocks.  Also, the dollar eased as 10-year Treasury yields rose to under 1.50%. This suggests that there is no generalized risk-aversion.

The U.S. stock market is expected to recover between 25% and 30% of Monday’s losses. However, they were barely outperforming at 6 :15 AM ET (1115 GMT) with only 0.5% gain, while contract prices were up 0.4%, and were up by 122 points which was also 0.4%.

Facebook, Nvidia Moderna (NASDAQ:) – all heavy losers on Monday – were up by around 1.5%.

Pepsico recently raised its guidance for full-year 2018, and Tesla (NASDAQ) was fined $130 million in federal court for its second race-based harassment judgement in just four months. Another case of this nature is currently pending at a California state Court.

2. Oil hits new 7-year high, API stockpile data due

Crude oil prices hit new highs seven years after major buyers rejected the Organization of Petroleum Exporting Countries’ (especially Russia) pleas to increase production.

According to OPEC+, the bloc did not change its agreed timetable and increased output by 400,000 barrels per day. This is in line with forecasts of a slowing global demand next year.

International prices are now at $80 and demand destruction is more probable. Futures rose 0.6% to $81.74 per barrel at 6:15 AM ET. They were 0.5% higher at $77.97/barrel at the same time.

OPEC+’s action adds a bit more spice to U.S. crude stockpiles data due at 4:30 PM ET from the American Petroleum Institute.

3. Facebook denies that hacker was involved in outage and blames the network

Facebook’s various social media and messaging services all returned to normal operations after the company’s worst-ever outage on Monday, which contributed to a stock price drop of 4.9% that shaved $7 billion from founder Mark Zuckerberg’s personal paper fortune.

Stock is down 15% from peak, and will face new challenges Tuesday when Frances Haugen, whistleblower for the Senate, prepares to testify on its governance failures.

Facebook attributed the outage to a network configuration problem and rejected suggestions – which circulated widely online on Monday – that user data had been compromised. According to Politico, the company is currently facing litigation from shareholders over the way it settled previous actions by federal regulators over allowing data to be used without their owners’ consent.

4. Another Chinese developer defaults 

China Evergrande’s systemic risk was again exposed when Fantasia, an international real estate developer, failed to pay $206 million on her bond. This shows that China Evergrande is not the only country with problems associated with excessive debt.

Fantasia, a smaller company than Evergrande’s, was able to hold the bond by one creditor. Fears of bigger problems led to the stock market falling in Hong Kong for several other property developers. Elsewhere, Fitch Ratings downgraded developer Sinic’s long-term senior debt to CCC, a level that implies imminent default.

Evergrande’s shares remained suspended for a second day in Hong Kong, along with those of Hopson Developments, which was reported on Monday to be preparing to buy 51% of Evergrande’s profitable property services business. That still hasn’t been confirmed.

5. Europe’s energy shortage worsens

Europe’s energy crunch intensified as utilities continued to outbid each other for scarce supplies of as the winter heating season starts. In the U.K., benchmark prices rose by around 15% but then slowed down a bit.

Fuel shortages have also hit coal-fired plants in Germany, while a strike at Electricite de France is also reducing nuclear output from the continent’s biggest power generator.

IHS Markit’s final business survey earlier revealed that business activity was slowing down from its historically high September levels. The ‘prices paid’ part of the U.K. purchasing manager index notably rose to its highest on record, as Prime Minister Boris Johnson warned that shortages of fuel and other goods could extend through the end of the year.