MARKET WRAPS

Watch For:

U.S. Existing Home Sales for August; EIA Weekly Petroleum Status Report; U.S. Federal Reserve economic projections, U.S. interest rate decision.

Opening Call:

Stock futures rose as concerns over giant property developer China Evergrande Group eased and investors awaited a policy update from the Federal Reserve.

China's Shanghai Composite reopened after a holiday to muted gains, closing up 0.4%. Markets in Hong Kong were closed for a holiday Wednesday. Hong Kong's Hang Seng Index sold off earlier this week alongside broader markets as investors feared that defaults from one of China's biggest developers could create contagion risks in the broader market.

An onshore unit of Evergrande said Wednesday it would make an interest payment on time this week, though the debt-ridden conglomerate is seen missing a separate payment due on dollar bonds. Investors expect the Chinese government will step in to stave off ripple effects that could affect the country's growth and weigh on the global economic recovery.

"We don't know yet what that attempt to limit contagion is going to be, but the market does expect that Beijing will act," said Susannah Streeter, senior investment and markets analyst at U.K. asset manager and stockbroker Hargreaves Lansdown.

Investors are also awaiting an update to the Fed's monetary policy and economic projections. Officials are due to release a statement at 2 p.m. ET, followed by a press conference.

Expectations that Fed Chairman Jerome Powell could use the occasion to mark the scaling back of the pace of bond purchases this year have waned due to Evergrande fears and concerns over the pace of the U.S. labor market recovery, money managers say. Investors expect that any such reduction would be extremely gradual.

"Today it's a bit of a wait-and-see mode in terms of what the Federal Reserve will do," Ms. Streeter said.

"With Evergrande, there are concerns over what might happen with the global economy so there's some expectation that officials will take their foot off the pedal very slowly."

Forex:

The dollar's reaction to the Fed's policy statement will likely depend on the interest-rate outlook, given it is widely expected that the central bank will signal a decision on tapering asset purchases will be made in November or December, Commerzbank said.

Fed projections that point to rate increases starting earlier "would certainly be dollar positive," said strategist You-Na Park-Heger.

However, recent weaker economic data would justify caution and the Fed may try to dampen rate-rise expectations, she said.

"Today's Fed meeting might not provide any new impetus as far as EUR/USD is concerned, and it is possible that USD bulls will be disappointed," she said.

A surprise failure to signal tapering would "constitute a bitter disappointment" and the dollar would weaken, she added.

The dollar should stay supported by safe-haven demand even if the Fed is more cautious about prospects for tapering asset purchases than some expect, UniCredit said.

The dollar "is enjoying renewed support due to its safe-haven status" and concerns over China are likely to ensure trade in major currencies remains nervous, it said.

This may help offset any "broad-based downward correction" it would otherwise suffer if the Fed doesn't "sound as hawkish as some in the market expect."

Although an upward revision to interest-rate projections would be positive, the Fed will likely stress tapering will be gradual and won't necessarily herald rate increases, UniCredit said.

Bonds:

In bond markets, the yield on the 10-year Treasury note ticked up to 1.328% from 1.323% Tuesday.

The combination of still high growing inflation, the continuing pickup in the U.S. economy, and a tapering decision by the Fed is still likely to put upward pressure on long U.S. yields in particular in the next three months, Arne Lohmann Rasmussen, chief analyst and head of corporate research at Danske Bank, said.

However, the economic outlook has become "muddier", and recent developments in China could potentially send shockwaves through global financial markets, which would push long yields down in the coming months, he said.

Danske expects the 10-year U.S. Treasury yield to rise to 1.5% by the end of 2021, with a further increase to 2% in 12 months' time. The current level is 1.33%, according to Tradeweb.

Commodities:

Oil prices rose, with weekly API inventory data showing a sharp decline in inventories, according to DNB Markets' Helge Andre Martinsen. U.S. crude stocks fell 6.1 million barrels versus a consensus forecast of 3 million, making the overall figures "bullish," he added.

Elsewhere, in a relatively quiet week, investors are absorbing Russian forecasts for a bumper production year next year, awaiting U.S. Energy Information Administration data due later Wednesday, and continuing to watch European gas prices.

Copper prices jumped as Chinese traders return to the market following a public holiday. Three-month copper prices on the LME rose 2.3% to $9,221 a metric ton.

Chinese markets reopened Wednesday for the first time since Friday and helped push up metals prices which had slumped during their absence.

Some positive news about China Evergrande also helped lift the mood: the indebted company said they will meet an interest payment tomorrow. Still, uncertainty remains about the property giant's future.

"Prices mean-reversed after falling during the Chinese absence and there was a bit of positive sentiment sipping back into markets after the real estate unit of China Evergrande Group, " Anna Stablum at Marex said.

Gold prices were unchanged in early European trade.

TODAY'S TOP HEADLINES

Most of $9.2 Billion in Questionable Medicare Payments Went to 20 Insurers, Federal Investigators Say

Medicare insurers drew $9.2 billion in federal payments in one year through controversial billing practices, with 20 companies benefiting disproportionately and together accounting for more than half of the total, according to federal health investigators.

The findings by the Office of Inspector General of the Department of Health and Human Services are the latest sign of growing scrutiny of Medicare Advantage insurers, which offer private plans under the federal benefit program.

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China Evergrande Onshore Unit Will Pay Yuan Bond Interest on Time

An onshore unit of China Evergrande Group said Wednesday it would make an interest payment on time this week, as investors wait to see if the debt-ridden conglomerate makes a separate payment due on dollar bonds that it is expected to miss.

The unit, Hengda Real Estate Group Co., will pay 232 million yuan, or the equivalent of about $35.9 million, of interest on its 5.80% September 2025 onshore yuan-denominated bond on Thursday, the company said in a stock-exchange filing.

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Ida Storm Damage Expected to Cost Insurers at Least $31 Billion

Ida is poised to join Katrina, Sandy, Harvey and Irma on the list of the top five costliest hurricanes as measured by insured losses.

Estimates of Ida's damage have continued to climb as insurers disclose their costs. In one of the newest revisions, Risk Management Solutions Inc., a major catastrophe-risk modeling firm, last week estimated Ida's U.S. insured losses at between $31 billion and $44 billion since its Aug. 29 landing in Louisiana.

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Netflix to Buy Roald Dahl Catalog, Adding 'Charlie and the Chocolate Factory' to Its Stable

Netflix Inc. said it has agreed to buy the Roald Dahl Story Co., adding popular children's stories like "Charlie and the Chocolate Factory" and "Matilda" to its stable as it looks to counter slowing subscriber growth.

The streaming giant said Wednesday that by acquiring the U.K.-based company, which controls the rights to the author's stories and characters like "Fantastic Mr. Fox," "The Twits" and "The BFG," it aimed to produce animated and live-action films and TV shows. It also said it could produce games, live theater and consumer products based on Mr. Dahl's creations.

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DraftKings Makes Bid for Gambling Company Entain

U.S. sports-betting operator DraftKings Inc. has made a cash and stock offer for global gambling company Entain PLC in a deal valued at almost $22.4 billion.

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FedEx Earnings Reflect Labor Shortage, Supply-Chain Woes

FedEx Corp. cut its financial outlook as labor shortages caused expenses to soar in the latest quarter and shipping demand unexpectedly slowed due to supply-chain disruptions.

The delivery giant on Tuesday posted an 11% drop in profit for the quarter ended Aug. 31 as the tight labor market added $450 million to costs, including increased overtime, higher wages to attract workers and extra spending on transportation.

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Disney+ Subscriber Growth Slows Down

Subscriber growth at Walt Disney Co.'s flagship streaming service has slowed in the current quarter, Chief Executive Bob Chapek said Tuesday, a development that sent company shares falling in midday trading.

Investors should expect a subscriber increase in the "low single-digit millions" for Disney+ after the service encountered headwinds, Mr. Chapek said. In the company's most recent quarter, Disney+ subscriber numbers beat estimates when the service added more than 12 million subscribers, reaching 116 million.

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Fed Meeting Will Focus on Taper Timetable

Federal Reserve officials will look to forge agreement Wednesday over how and when to begin reducing their large-scale bond-buying efforts, which they launched early in the pandemic to stimulate the U.S. economy.

The central bank in July gave its first signal that officials were more confident the economy was meeting their goals. Since then, senior leaders including Fed Chairman Jerome Powell have indicated they could start to reduce, or taper, those purchases this year.

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Ifo Institute Cuts Growth Forecast for Germany in 2021 to 2.5%

The Ifo Institute has cut its growth forecast for Germany in 2021 by 0.8 percentage point to 2.5%, as the economy didn't rebound as strongly as expected in the third quarter.

The Ifo downgraded its forecasts for 2021, but raised its growth forecast for 2022 by 0.8 percentage point to 5.1%. In 2023, growth will be 1.5%, the Ifo said.

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BOJ Sticks to Ultra-Easy Monetary Policy Path

TOKYO--The Bank of Japan on Wednesday confirmed it would stick to an ultra-easy monetary policy, while other major central banks are moving toward scaling back their asset purchases.

The Japanese central bank maintained its target for short-term interest rates at minus 0.1% and its target for the 10-year Japanese government bond yield at around zero. It also reiterated that it would purchase JGBs without an upper limit.

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Infrastructure Plan Faces Fresh Uncertainty as Democrats Remain Divided

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As the party struggles to find a path forward, Mr. Biden plans to meet Wednesday with Senate Majority Leader Chuck Schumer (D., N.Y.) and House Speaker Nancy Pelosi (D., Calif.) at the White House to discuss the two proposals, according to a person familiar with his schedule. Mr. Biden was also expected to convene a group of House and Senate Democrats to discuss the proposals as he takes a more prominent role in steering his legislative agenda through Congress.

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Debt-Limit Suspension Passes House, Faces Standoff in Senate

WASHINGTON-The House passed Tuesday a measure keeping the government funded until early December and suspending its borrowing limit through 2022, but without having resolved the partisan standoff poised to derail it in the Senate.

With less than two weeks before the government's current funding expires at 12:01 a.m. Oct. 1, the House passed in a 220-211 party-line vote a package unveiled earlier in the day that would fund the government through Dec. 3, 2021, and suspend the debt limit through Dec. 16, 2022. The Treasury Department is currently using emergency measures to cover America's bills for several months until the debt limit is raised or suspended again.

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SEC's Gensler Doesn't See Cryptocurrencies Lasting Long

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Mr. Gensler likened the thousands of cryptocurrencies in existence to the so-called wildcat banking era that took hold in the U.S. from 1837 until 1863 in the absence of federal bank regulation. Before President Abraham Lincoln created the Office of the Comptroller of the Currency, banks issued their own currencies, which they sometimes refused to redeem for their purported value in gold or silver.

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Liz Cheney's Re-Election Bid Pits Trump Against Bush

WASHINGTON-The race for Wyoming's single U.S. House district has pitted two of the biggest names in Republican politics against one another: both of the party's living former presidents.

Former President George W. Bush's first campaign event of the 2022 midterms will be a fundraiser to support Rep. Liz Cheney, the Wyoming Republican who is among former President Donald Trump's top targets to unseat. The fundraiser will be held next month in Dallas, according to a copy of an invitation viewed by The Wall Street Journal.

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U.S., Russian Military Officials Meet Amid Concerns About Terrorism Fight

HELSINKI-The Pentagon's top officer met with his Russian counterpart in the Finnish capital Wednesday amid American and allied efforts to find ways to fight terrorism after the departure of U.S. and allied troops from Afghanistan last month.

Chairman of the Joint Chiefs of Staff Army Gen. Mark Milley met here with Chief of Russian General Staff Gen. Valery Gerasimov, officials said. U.S. military officials declined to provide any details of the meeting, except to issue a brief statement saying the two discussed "risk reduction and operational de-confliction."

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Most of $9.2 Billion in Questionable Medicare Payments Went to 20 Insurers, Federal Investigators Say

Medicare insurers drew $9.2 billion in federal payments in one year through controversial billing practices, with 20 companies benefiting disproportionately and together accounting for more than half of the total, according to federal health investigators.

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Europe's Covid-19 Vaccination Success Faces Winter Test

Europe's successful vaccination campaigns now face their toughest test: Winter.

The coming months will test whether high vaccination rates and a patchwork of low-intensity public health measures can keep the highly contagious Delta variant in check as temperatures drop and people huddle indoors.

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China's Xi Commits to Stop Building Coal Plants Abroad

Chinese President Xi Jinping on Tuesday said Beijing would stop building coal-fired power plants abroad, in a public commitment to redirect the country's huge engineering industry away from adding to a source of global pollution.

Beijing has faced pressure from the U.S., the European Union and environmental groups for having continued to finance and build coal-fired power plants in many developing countries, even as it said it would cut greenhouse emissions at home.

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Write to sarka.halas@wsj.com

TODAY IN CANADA

Earnings:

BlackBerry Limited (BB.T) 2Q

Economic Indicators (ET):

Nothing major scheduled

Stocks to Watch:

No items published

Other News:

No items published

Market Talk:

Brookfield May Face Hurdle in Getting Regulatory OK for AusNet Buy

Brookfield Asset Management faces a tricky task convincing Australia's foreign-investment watchdog to support its bid for AusNet Services, says UBS, even if it fends off competition from APA for the company. If the Foreign Investment Review Board approves Brookfield's buy of AusNet, and a KKR-led consortium's bid for Spark Infrastructure, then all of Victoria state's power distribution and transmission infrastructure would be foreign owned. "We believe Australia's Cyber & Infrastructure Security Centre may consider electricity transmission one of the most critical types of infrastructure from a national security perspective potentially applying a very high bar for FIRB approval," UBS says. This is especially so given planned investment in Victoria's electricity transmission to support Australia's energy transition, it adds.

Expected Major Events for Wednesday

05:00/JPN: Aug Steel Production

08:00/GER: Ifo Economic Forecast

08:59/JPN: Japan Monetary Policy Meeting decision

09:00/ITA: Jul Industrial turnover & orders

11:00/US: 09/17 MBA Weekly Mortgage Applications Survey

14:00/US: Aug Existing Home Sales

14:30/US: 09/17 EIA Weekly Petroleum Status Report

18:00/US: Federal Reserve economic projections

18:00/US: U.S. interest rate decision

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Wednesday

Basic Energy Services (BASXQ) is expected to report for 2Q.

BlackBerry (BB,BB.T) is expected to report $-0.15 for 2Q.

Enochian Biosciences Inc (ENOB) is expected to report for 4Q.

General Mills (GIS) is expected to report $0.86 for 1Q.

HB Fuller Co (FUL) is expected to report $0.79 for 3Q.

KB Home (KBH) is expected to report $1.60 for 3Q.

Raymond James Financial (RJF) is expected to report.

Steelcase Inc (SCS) is expected to report $0.27 for 2Q.

Vintage Wine Estates Inc (VWE.U.T) is expected to report for 4Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

Bath & Body Works Raised to Buy From Hold by Argus Research

Big Lots Cut to Neutral From Overweight by Piper Sandler

Clovis Oncology Is Maintained at Buy by HC Wainwright & Co.

Energy Transfer Raised to Buy From Hold by Tudor Pickering

General Mills Cut to Underweight From Equal-Weight by Morgan Stanley

Hostess Brands Raised to Overweight From Equal-Weight by Morgan Stanley

Oshkosh Cut to Hold From Buy by Jefferies

PacWest Bancorp Raised to Buy From Hold by Truist Securities

SmileDirectClub Cut to Hold From Buy by Stifel

South State Raised to Buy From Neutral by DA Davidson

Steven Madden Raised to Buy From Hold by Jefferies

Vail Resorts Raised to Overweight From Sector Weight by Keybanc

Zumiez Cut to Hold From Buy by Jefferies

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

September 22, 2021 06:12 ET (10:12 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.