Evergrande is China’s second-largest property developer. Noel Celis/Getty Images
After the S&P 500's worst day since May, US stocks are poised to gain Tuesday.
The market is concerned that Evergrande, a Chinese property developer, could become a new debt crisis.
However, strategists believe there is a strong "buy the-dip" reaction which is supporting equities.
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After Evergrande's debt crisis sent equity markets tumbling, the US stock market rallied Tuesday.
Oil prices made up some of Monday's lost ground and have since recovered some of their losses elsewhere in the markets. After investors purchased safe-haven assets during the previous session, US bonds and dollar fell.
S&P 500 futures rose 0.9% at 6.00 a.m. ET ET.
Dow Jones futures rose 338 point for a gain of 1%, following Monday's close with a drop of 614 points or 1.78% in the related index. After the tech-heavy index closed down 2.1%, Nasdaq 100 futures rose 0.81%.
Analysts believe that investors still hold the "buy the dip" mentality which has supported stocks throughout the year. This explains why equities lost less in late trading Monday and rebounded on Tuesday.
However, strategists stated that investors will be anxious about Wednesday's Federal Reserve interest rate decision. The central bank will weigh up whether to withhold support for the economy due to strong growth and high inflation. Today marks the beginning of the meeting of Fed policymakers.
Stocks in the US were already in a quiet retreat after Monday's Evergrande debt crisis raked markets. This led to concerns about financial contagion worldwide and talk of China "Lehman Brothers" moment. Many analysts however downplayed the risks to the wider financial system and suggested that Beijing might intervene.
Evergrande, China's second largest property company and owes creditors more than $300 billion, is likely to miss key bond interest payments due on Thursday.
The stock dropped 0.44% Tuesday after a 10.24% plunge the day before. This was in response to S&P Global Ratings predicting a default on these payments. S&P stated that it does not expect the Chinese government will provide any support for Evergrande, and that China's banks can handle a default by the developer with minimal disruption.
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As investors waited for the next developments, relative calm settled over the wider Hong Kong market. After dropping 3.3% on the previous day, the Hang Seng index closed 0.522% higher. A gauge from Hong Kong's real-estate companies also stabilized. After being closed Monday and Tuesday due to holidays, the Chinese markets will reopen Wednesday.
Europe's Stoxx 600 index climbed 0.94% on Tuesday in Europe's early trading, while the FTSE 100 index rose 0.98% in the UK.
Stocks rebounded on Tuesday, as did oil prices. Brent crude oil rose 1.24% to $74.83 per barrel, while WTI crude rose 1.31% to $71.05 per barrel.
Steen Jakobsen, chief investment officer at Saxo Bank, stated that the bounce was supported "by improved risk sentiment and more importantly by the global energy crunch currently occurring in the natural gas marketplace."
After investors bought up US bonds in search of safer assets, US bonds fell on Monday. The yield on the 10-year US Treasury note, which is the most important, was up 2.4 basis point to 1.333%. The dollar index fell 0.14% to 93.15.
According to Bloomberg prices, Bitcoin fell 0.6% to $43,263, on Tuesday. It had fallen from $47,000 the day before as investors fled more risky assets.
