European stocks rose as concerns over giant property developer
China Evergrande Group eased and ahead of the U.S. Federal Reserve
interest-rate decision later.
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.
Shares on the move:
Mining, financial and oil stocks advance while gaming shares
rise following an improved offer for Entain from DraftKings.
Data in focus:
Following drop in purchasing managers indexes across Europe in
August, early surveys and most high-frequency data point to a
further moderation in growth momentum across the continent, Goldman
The bank forecasts the PMIs declining again in September, with
the eurozone composite PMI falling to 57.4 from 59.0 in August.
Moroever, Goldman Sachs expects the composite PMI for the U.K.
to fall to 53.8 in September from 54.8 in August. "Despite these
projected declines, we expect the PMIs to remain well in
expansionary territory, consistent with our forecast of continued
firm growth across Europe and the robust forward-looking
subcomponents of the PMIs," Goldman Sachs said.
PMIs for the eurozone and the U.K. will be published
With no single party holding a convincing lead, the next German
government will probably be a three-party coalition for the first
time since the early post-war years, UBS economists Dean Turner and
Maximilian Kunkel said.
For investors, key areas to focus on are climate change,
digitalization, fiscal policy and appetite for further European
Union integration, the economists said.
"Most of the major political parties have pledged to deliver
more in these areas, particularly the first two," UBS said.
However, the full extent of any changes won't be known until
collation negotiations are complete, the economists added.
Stock futures rose as investors awaited a policy update from the
Investors are 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
"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."
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
Fed projections that point to rate increases starting earlier
"would certainly be dollar positive," said strategist You-Na
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.
The pound's recent falls and its underperformance compared with
other higher-beta currencies suggest markets "have turned less
confident" that the Bank of England "will be able to stick to its
broadly optimistic tone" at Thursday's policy announcement, ING
Increasing risk aversion on financial markets has caused
sterling to weaken in recent days, they said. GBP/USD fell 0.2% to
a one-month low of 1.3630, according to FactSet, though a cautious
Fed announcement could prompt a recovery to around 1.3700 as the
dollar weakens, ING said.
The Fed's policy decision due later should be neutral for
European corporate bond markets as signals regarding a planned
tapering of bond purchases later this year are widely expected,
"As an indication that the Fed will start tapering its asset
purchases by the end of the year is broadly expected, this should
be neutral for the European credit market," analysts at the bank
Fed officials have said that they could begin reducing, or
tapering, their $120 billion in monthly purchases of Treasurys and
mortgage-backed securities this year.
Some market observers expect Chairman Jerome Powell may signal
they are likely to start the process at their following meeting in
Eurozone government bond yields were trading higher across the
board, indicating better risk sentiment at the start of the day.
Aside from any headlines on troubled Chinese property conglomerate
Evergrande, the day's focus will be the Fed's policy
"Investors will be looking to determine whether recent events
around surging energy prices, and Evergrande, have altered the
prevailing narrative," said Michael Hewson, chief market analyst at
The ECB's strong corporate bond purchases last week have helped
credit spreads to stay largely stable, said UniCredit. Official
data showed the central bank ploughed EUR1.058bn in net corporate
bond purchases in the week ending Sept. 17, bringing total net
purchases to EUR5.4 billion so far this month, analysts at the bank
ECB's month-to-date purchases in September represent 77% of this
month's estimated net issuance of EUR 7bn billion from
investment-grade issuers tracked by the Market iBoxx corporate bond
index, they sid.
"Against this backdrop, and despite decent primary market
activity, investment-grade corporates closed almost flat to
marginally wider yesterday," they said.
A moderately looser fiscal stance, that could be expected under
the most likely coalition scenarios after the German elections, is
unlikely to have an impact on government bond yields as the ECB's
bond buying program will continue to keep Bund supply relative
scarce, said UBS Global Wealth Management's economist Dean Turner
and strategist Maximilian Kunkel.
"In fact, if Germany issues green bonds to fund investment in
preventing climate change, demand is likely to be even higher given
the increasing demand for this sub-asset class," they said.
Only a left-wing, red-red-green government could put upward
pressure on bond yields in the short term because markets would
likely translate significant fiscal pledges into a more substantial
supply in Bunds.
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
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
"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 European trade.
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.
Traton Warns Supply Shortages Will Hit 3Q Vehicle Sales
Traton SE said Wednesday that shortages of semiconductors and
other parts are hitting sales in the third quarter and are expected
to continue into the next year.
Volkswagen AG's truck maker said vehicle sales in the current
quarter will be significantly lower than planned due to the
shortages, which it expects to continue into and beyond the fourth
quarter. All of its brands, including recently acquired Navistar,
are affected, it said.
Ifo Institute Cuts Growth Forecast for Germany in 2021 to
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.
Entain Considers Improved GBP16.4 Bln Bid From DraftKings
Entain PLC said Wednesday that it is considering a new, improved
takeover bid from DraftKings Inc. after rejecting an earlier offer
from the U.S. digital sports-betting and entertainment company.
Entain, a betting-and-gambling group, said the new offer is for
2,800 pence ($38.25) a share, consisting of 630 pence in cash and
the balance payable in DraftKings shares. This represents a premium
of 46% to Entain's closing price on Monday, and values the company
at 16.40 billion pounds ($22.40 billion).
Iliad to Acquire UPC Poland From Liberty Global
Iliad SA said Wednesday that it has agreed to acquire cable
operator UPC Poland for an enterprise value of 7 billion zloty
($1.78 billion) from Liberty Global PLC.
The French telecommunications company said its subsidiary, Play,
which it acquired in 2020, would take 100% of UPC Poland's share
capital in the deal that would help Iliad to expand further into
the Polish telecom market.
Airbus Confident in Raised Production Targets, CCO Says
Airbus SE's order book is strong enough to assure production
will continue to grow as previously guided, and could perhaps be
raised further, according to the European plane maker's chief
Airbus in May said that it was stepping up production, targeting
a monthly production of 64 planes of the A320 family by the second
quarter of 2023, a higher rate than before the pandemic. Group CCO
Christian Scherer told journalists late Tuesday that he was
confident that the order book is currently strong enough to ensure
this level of production, and that it could even go higher.
Legrand Backs Mid-Term Targets; to Focus on Fast-Growing
Legrand SA on Wednesday confirmed its mid-term sales and
operating-margin targets, and said that it plans to concentrate on
spurring growth in its most promising business segments.
Marking its capital-markets day, the French industrial group
reiterated its mid-term targets, set out in February, of achieving
average annual organic sales growth between 5% and 10%, as well as
an adjusted operating margin of around 20%. Legrand is also aiming
for normalized free cash flow of between 13% and 15% of sales on
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
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
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
China Evergrande Onshore Unit Will Pay Yuan Bond Interest on
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.
Ida Storm Damage Expected to Cost Insurers at Least $31
Ida is poised to join Katrina, Sandy, Harvey and Irma on the
list of the top five costliest hurricanes as measured by insured
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.
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.
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
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.
RBA Ramps Up Warnings About Soaring House Prices, Instability
SYDNEY-The Reserve Bank of Australia has significantly ramped up
warnings about the growing risk of financial-sector instability if
house prices continue to surge, adding to already considerable
levels of household debt across the economy.
Michele Bullock, RBA assistant governor for financial system,
said in a speech on Wednesday that even though Australia's banks
have strong balance sheets and lending standards are being
maintained, "a high level of debt could pose risks to the economy
in the event of a shock to household incomes or a sharp decline in
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.
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
U.S., Russian Military Officials Meet Amid Concerns About
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
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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(END) Dow Jones Newswires
September 22, 2021 06:18 ET (10:18 GMT)
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