Eurozone Flash Consumer Confidence Indicator; Germany Ifo
Economic Forecast; Italy Industrial Turnover/Orders; U.S., Japan
Monetary Policy Decisions; updates from Legrand, Babcock,
Sainsbury's, Halma, Sasol
Continued caution over China Evergrande and worries ahead of the
Fed policy update will likely cap gains for European shares on
Wednesday. In Asia, stock markets were mostly lower, the dollar,
Treasury yields and gold were little changed, while oil extended
Cautious gains are likely for European stocks on Wednesday,
following a choppy session on Wall Street, as the market slowly
attempts to recover from the China Evergrande rout
The Dow and S&P 500 extended losses to a fourth day in a row
on Tuesday, marking the worst stretch for the S&P 500 since
mid-May, with investors testing the market's low from the day
before when concerns over the heavy debt burden of China Evergrande
sparked a selloff.
"It's not surprising that September brings a little volatility
to the market," Jay Pestrichelli, chief executive officer of ZEGA
Financial, said. He viewed the "noise" around Evergrande as a
buying opportunity. "We put money to work yesterday," he said. "We
like the S&P 500."
In Asia, shares were mostly lower on Wednesday, tracking the
mixed performance on Wall Street.
Later Wednesday, the Federal Reserve is expected to send its
clearest signal yet that it will start reining in its
ultra-low-interest rate policies later this year. The FOMC policy
meeting could lay the groundwork for an announcement of a pullback
Back in Asia, the Bank of Japan kept its ultra-supportive
monetary policy unchanged, as expected.
The dollar held steady in Asia with traders mostly on hold for
the FOMC meeting, IG said. Near-term catalysts include whether
there'll be a hawkish stance from the Fed, and if developments in
China Evergrande drive further risk-off moves, IG added.
CBA expects the dollar to remain in a tight range ahead of the
Fed but thinks monetary policy settings are likely to remain
unchanged, with the setback in the U.S. labor market recovery in
August and the jump in serious Covid infections, likely to
encourage the FOMC to wait before it announces any tapering
The FOMC may discuss how delta-related disruptions are delaying
many workers' return to the labor market, CBA added.
Still, elevated underlying inflation may also encourage more
FOMC members to forecast the start of a rate tightening cycle in
2022 in the dot plot.
Moves in Treasury yields were capped in Asia, as the market's
focus continued to shift away from the Chinese property crisis to
the Fed meeting.
Although a tapering announcement is basically ruled out,
according to Amherst Pierpont, "momentum continues to build toward
a reduction in the pace of QE soon."
The firm noted that only two more 2021 meetings are left if
indeed no tapering is announced Wednesday. "That leaves the top
agenda item for this week's meeting as offering the 'advance
notice' that Powell has promised," Amherst said, adding that
details are more likely to come in the press conference than in the
At the start of this week, investors sold euro-denominated
corporate bonds with higher beta, or volatility relative to a
benchmark, amid fears that the possible collapse of China
Evergrande could ripple through global markets.
Commerzbank advised clients to wait until after the Fed decision
before starting to buy debt where the price has fallen. "We would
wait before making use of setbacks in the high-beta space," credit
strategist Cem Keltek said.
There is "limited" visibility on any future impact on high-beta
cash corporate bonds from any possible default of Evergrande, while
if the Fed outlines plans to taper asset purchases Wednesday this
could damage feeble risk sentiment further, he said.
Commerzbank said riskier, more volatile euro-denominated
corporate debt should remain vulnerable to souring market sentiment
on the back of China Evergrande's default prospects.
"While direct exposure to the Chinese real estate sector is
limited in euro-credit benchmarks, particularly higher beta
segments should remain sensitive to deteriorating risk sentiment on
the back of further turmoil in China," Keltek said.
Oil climbed further in Asia, with prices extending Tuesday's
gains, as traders grapple with a slower-than-expected return of
U.S. crude supply from the Gulf of Mexico after Hurricane Ida,
Rystad Energy said.
"Total production loss in the U.S. Gulf of Mexico in September
now seems likely to stand at about 790,000 bpd, higher than our
previous estimates, " Rystad said.
Prices could be weighed by China Evergrande's debt problems
which may have a knock-on bearish effect on commodity prices, but
traders think that oil supply news from the U.S. is more
significant, Rystad added.
"Bringing a bullish tailwind" are expectations for a drawdown of
U.S. crude inventories and reports that OPEC+ is 116% compliant in
August with their oil production curbs, analysts at Blue Line
Futures wrote in their latest note.
"We expect bullish tailwinds to show up from the risk-landscape
in the near term," analysts at Blue Line Futures said. "From there,
we do believe a subsiding delta narrative can bring a strong
year-end rally," as the U.S. has begun "laying a plan to lift
travel bans for international travelers and we expect this to be an
ongoing narrative in Q4."
Gold futures were flat despite some support demand for
safe-haven assets stemming from China Evergrande's debt
ANZ said investors are looking out for signals from the Fed on
any changes to its asset-purchasing activity. "While many
uncertainties are still looming, investors would be looking out for
cues on timing and duration of Fed tapering to build fresh
Copper rose 3%, breaking a four-day losing streak on the LME on
strong Chinese buying interest due to further signs of market
tightness, Marex said.
The broker noted the copper market flipped to a global deficit
of 90,000 tons in June compared with a 4,000-ton surplus in May,
with the tightness showing little signs of abating. After recent
price declines, "we saw strong evidence of a Chinese bid into the
dip," Marex said.
TODAY'S TOP HEADLINES
Evergrande Onshore Unit Set to Pay Bond Interest on Time
An onshore unit of China Evergrande Group is set to make an
interest payment on time on Thursday, offering the debt-ridden
conglomerate a sliver of breathing room as it struggles to fix its
capital structure and repair its global image.
The unit, Hengda Real Estate Group Co., will pay 232 million
yuan ($35.9 million) of interest on its 5.80% September 2025 bond,
it said Wednesday in a filing.
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.
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.
Infrastructure Plan Faces Fresh Uncertainty as Democrats Remain
WASHINGTON-Persistent divisions among Democrats over the size of
their climate and social-welfare plan are threatening to derail
much of President Biden's agenda, as progressives signal that they
could block passage of a roughly $1 trillion infrastructure package
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
SEC's Gensler Doesn't See Cryptocurrencies Lasting Long
WASHINGTON-Securities and Exchange Commission Chair Gary Gensler
said Tuesday he doesn't see much long-term viability for
cryptocurrencies, underscoring the importance of protecting
investors in the market and bringing it under regulatory
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.
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.
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 more than $20 billion, according to people familiar with the
The move would give DraftKings a fast expansion into
international gambling markets, with Entain's licenses to operate
in 27 countries and its online technology. The deal could face
hurdles, as Entain is a key partner to one of DraftKings' biggest
rivals, MGM Resorts International, which said that completing the
deal would require its support.
Swedbank Launches Search for New Compliance Chief
STOCKHOLM-Swedbank AB said Tuesday it has launched a search
process to find a new chief compliance officer after its current
compliance officer, Ingrid Harbo, decided to retire.
Ms. Harbo, who has been a member of the Swedish bank's group
executive committee since 2019, will leave the company on March 31,
2022, and remain in her role until then, Swedbank said in a
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Expected Major Events for Wednesday
04:30/NED: Sep Consumer confidence survey
04:30/NED: Jul Consumer Spending
06:00/DEN: Sep Consumer expectations
07:00/SWI: 2Q Balance of Payments
07:00/SPN: Jul Industrial Orders & Turnover
08:00/GER: Ifo Economic Forecast
09:00/ITA: Jul Industrial turnover & orders
09:00/MLT: Aug RPI
10:00/IRL: Aug WPI
12:00/POL: Aug Broad money M3
14:00/EU: Sep FCCI Flash Consumer Confidence Indicator
14:00/DEN: Aug Central Government Finance & Debt
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(END) Dow Jones Newswires
September 22, 2021 00:42 ET (04:42 GMT)
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