Several central banking big-hitters meet in coming days, with the U.S. Federal Reserve’s Sept. 21-22 meeting topping the must-watch list.
Recent data shows that caution is warranted regarding the timing of Fed’s U.S. tapering plan. The U.S. created its smallest number of jobs in 7 months, and consumers prices rose at the slowest rate in 6 months.
Many officials believe that the Fed will begin tapering its pandemic stimuli this year. Fed chief Jerome Powell might agree with that view, but he also stressed that an increase in interest rates is not yet possible.
While the Bank of Japan will maintain policy, it could warn of increasing risks for exports due to supply disruptions.
– U.S. inflation coming off the boil as prices increase slowly in August
– BOJ to maintain stimulus as supply disruption darkens export outlook
Central bank policy rates https://graphics.reuters.com/USA-MARKETS/CENTRALBANKS/zjpqkjjowpx/chart.png
2/ THE FIRST AND THE LAST
Confirmation that a major central bank is raising interest rates rather than just talking about it, will be significant for markets hooked on cheap cash. Norway’s central banks will soon raise rates to 0.25%, possibly replacing the 0% rate.
While the Bank of England won’t change policy, it is expected that traders will price in a rate hike next May. Consumer prices growth has been at an unprecedented 9-year high since August. The BoE will likely signal its opinion at Thursday’s meeting on whether inflation is still considered temporary.
The laggards will also be heard — Switzerland won’t begin to shrink its balance sheets or raise rates (the lowest in the world) until after all the rest. Sweden will keep its rates unchanged at 0% for 2024. However, the announcement of its monetary policy on Tuesday could reflect a change in direction after high inflation readings.
– UK inflation posts record jump to hit 9-year peak in August
Shifting sands https://graphics.reuters.com/BOE-RATES/znpnebkedvl/chart.png
3/ EVERGRANDE ENDGAME?
Evergrande is a Chinese property developer that has been left with no cash and must raise $120million in bond coupons payments.
This tiny sum could prove to be the turning point in a 355 billion-plus company with over 1,300 properties across China. It also has more than $300 billion in liabilities.
China’s No. The number 2 developer in China has tried to raise money with fire sales of apartments and stake sale within its vast business network. However, it was unsuccessful.
It is navigating between a messy collapse or managed collapse and – most likely – a bailout by the government, so contagion risks are on its mind. Evergrande’s Hong Kong listed shares plunged by more than 80% in the past year. A Chinese high yield dollar debt index, which is currently at its lowest level for 17 months, has also fallen.
– Investors brace for a great fall in China
Evergrande’s woe have had big knock on effect for indebted Chinese firms https://fingfx.thomsonreuters.com/gfx/mkt/zdvxodrzopx/Pasted%20image%201631781813184.png
Purchasing managers indexes, an oft-used gauge of economic growth and corporate sentiment, are running well above historical averages but advance readings for September — due Thursday in many countries — will likely show PMIs edging further off the highs hit earlier this year.
In recent months, PMIs have shown an increase in supply chain bottlenecks, soaring input prices and the Delta COVID-19 variation. IHS Markit’s Euro zone Manufacturing PMIs dropped to 61.4 in August from 63 in July. They are likely to fall further this month, to 60.5.
In August, the composite global PMI Index of JPMorgan (NYSE 🙂 stood at 52.6. That’s six points lower than May’s record highs. These readings are above the 50 threshold that distinguishes growth from recession, and they remain healthy. The central bankers expected to meet next week probably don’t have any reason to worry.
-Factories hit by pandemic-related supply disruptions
Canadian Prime Minister Justin Trudeau gambled in calling an early election but opinion polls indicate it may backfire.
Trudeau’s Liberals and the opposition Conservatives have virtually tied Trudeau’s Liberals ahead of Monday’s election. This raises the possibility that any party can form even a stable minority government.
There is concern that Ottawa will not be able to respond effectively to COVID-19. The Canadian dollar lost 1% in the two years since Trudeau called it. Stocks are at their lowest level for three weeks.
Other political uncertainties are also looming, including the possibility of protracted coalition negotiations following Germany’s September 26th election.
– Investors tense up as fears of post-election gridlock rise in Canada
Markets brace for Canadian election uncertainty https://fingfx.thomsonreuters.com/gfx/mkt/zdvxodrlopx/canada1610.PNG