Closing Report 24.09.2021

Evergrande worries weaken through the week

 

AMERICAN MARKETS MID DAY

Major stock markets in the US opened lower this Friday with investors waiting for Federal Reserve Chair Jerome Powell’s remarks on the economic recovery after markets open, with housing data also due out later today. In addition, Elon Musk declared that he expects the current global semiconductor shortage to be short-term. US markets closed downwards on Monday, like the rest of the world, because of the Evergrande crisis. Meanwhile, builder confidence in the United States for the newly built single-family homes improved slightly in September compared to the previous month. On Tuesday, the downtrend countinued on US markets while the White House Press Secretary decalred that the president’s administration believes the raising of the debt ceiling should not be a partisan issue as lawmakers should protect the full faith and credit of the United States. On Wednesday, US stocks closed for the first time of the week higher following the decision of leaving interest rate unchanged at 0.00%-0.25% until maximum employment and inflation goals are met while the asset purchasing program adjustment was also delayed. US Federal Reserve President Jerome Powell signaled that tapering may begin next meeting and end by mid-next year. Thursday trading day also closed with gains despite a worse-than-expected report with 16,000 more jobless claims than last week.

EUROPEAN MARKETS CLOSING

European markets closed the week lower after Germany’s business sentiment deteriorated in September compared to August. Meanwhile, Credit Suisse sold almost its entire exposure to Evergrande Group. On Monday, markets closed lower as the Evergrande case has sent shockwaves trough global equities. Meanwhile, the German stock index, DAX, has been expanded by 10 companies and its total number of constituents will be brought up to 40, also  ECB’s Isabel Schnabel stated that asset purchases both under the Pandemic emergency purchase program (PEPP) and the Asset purchase program (APP) remain crucial in the post-pandemic future. Tuesday’s session has been ending up with gains as investors were optimists about econimic recovery after the Spain’ Economy minister predicted that the country’s economy will bounce back to pre-crisis levels by the end of the year. Meanwhile, European Central Bank’s (ECB) Vice President stated that inflationary levels in the Eurozone could peak at around 3.4% to 3.5%. Wednesday trading session also finished in the green zone ahead of the US Federal Reserves interest rates decision, and with a preliminary report showing Eurozone consumer confidence improved in September compared to the previous month to reach -4 points. On Thursday, markets closed slightly up as the Bank of England (BoE) took the decision to maintain its key interest rates at the latest policy meeting.

ASIAN PACIFIC MARKETS CLOSING

Asia-Pacific region markets closed mixed this Friday, like most of the week, on worries regarding China’s Evergrande Group and it’s apparent inability to service its debt, the sotck price tumbled over 11% during the session and after yesterday’s bounce. This week started lower on Evergrande worries, with the stock price falling by 17% that day, and several public holidays including Japan, mainland China and the Thanksgiving Day in South Korea which last until Wednasday. On Tuesday, China was still on public holiday and the markets traded mixed following the selloff of the previous day. Also, the Reserve Bank of Australia noted that there will not be a rate rise until 2024 as the pandemic continues to introduce uncertainty to the economy. Wednesday session closed mixed with both China and Japan central banks unveiling that they will keep interest rates unchanged in September. On Thursday, markets recorded a rebound as Chinese government is expected to take control of the Evergrande Real Estate Group within days, according to a report published by Asia Markets. In addition, Boeing CO annouced that China’s commercial airplane market will require 8,700 new planes by 2040 at a total value of around $1.47 trillion.

COMMODITIES & FOREX MARKETS

• United States crude stockpiles decreased by 3.5 million barrels to 414 million barrels in the week ending September 17, the US Energy Information Administration said in its weekly report published on Wednesday.
• The Euro initially tried to rally during the trading session on Friday but then broke down from here to show signs of weakness again, the market looks as if the 1.17 level is going to be targeted, and if we break down through their it is likely that we could go looking towards 1.16 level.
• The People’s Bank of China (PBOC) reposted a memo from September 15th that addresses the country’s Bitcoin ban to their website, causing widespread Bitcoin selling and a Friday morning price dip.

Lagarde believes that Europe have limited exposure to the Evergrande crisis 

The President of the European Central Bank, Christine Lagarde, said that the direct exposure of Europe to the Chinese real estate company Evergrande would be « limited » before adding “We are monitoring and I had a briefing earlier on today because I think that all financial markets are interconnected.”
Meanwhile, market experts say a deepening liquidity crisis at Evergrande could send further ripples across the global economy, but the issue will likely be contained by the Chinese government and is not expected to trigger imminent contagion.The company is deeply linked to the wider Chinese economy, and many financial institutions are exposed to the cash-strapped developer through direct loans and indirect equity.
When asked whether the ECB was prepared for the prospect of a chaotic global knock-on effect in the event of Evergrande’s collapse, Lagarde replied: “As I told you, for the moment, what we are seeing is [a] China-centric impact and exposure. I can’t speak for the United States [but] I can say for Europe that its direct exposure is limited.”