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PBOC Action, Evergrande, FDA Booster Shots


© Reuters.

By Geoffrey Smith — China’s central bank acts to calm markets as real estate developer Evergrande edges toward default. Prices of iron ore fall as lenders tighten their belts for developers. The FDA Panel will be reviewing the benefits and drawbacks of vaccination booster shots against Covid-19. Meanwhile, oil has reached its highest weekly close since six. What you should know about financial markets Friday, September 17th.

1. See, see the PBoC

China’s central bank injected $14 billion in short-term liquidity to ease stress in the country’s money markets, as highly-indebted China Evergrande lurched closer to defaulting on some $300 billion in debts.

Chinese stocks and the yuan both rallied, in anticipation of further official measures to keep markets functioning ahead of what is expected to be the country’s biggest-ever corporate default, crystallizing a problem that has been years in the making.

The South China Morning Post reported that two of the group’s staunchest backers appear to be bailing out of Evergrande Group, citing securities filings that showed Joseph Lau Luen-hung, the founder of Hong Kong developer Chinese Estates Holdings Limited, and his wife Chan Hoi-wan, selling 138 million Evergrande shares over several transactions in the past month for about $64 million.

2. Developer problems spell trouble for iron ore

Evergrande’s problems are one of the reasons behind the increasingly sharp decline in iron ore prices in recent days. Developers that have high levels of debt are also seeing their bonds go up in value, which is reducing financial resources for this sector and limiting their ability to fund new projects.

China’s largest buyers of steel are the developers.

Prices for iron ore have fallen by 45% since July’s highs. They traded at $118 per ton in Singapore Friday. UBS analysts said they expect prices to fall to below $100/t in the near term due to financing issues and the government’s anti-pollution drive, which will create more headwinds for steelmakers.

Shares in the big iron ore miners – BHP, Rio Tinto (NYSE:) and Anglo-American – all fell by between 1.5% and 3.5% in London.

3. Boeing (NYSE: ) is predicting that stocks will fall due to economic concerns.

U.S. stocks will open later due to ongoing concerns about the global economic environment. Those concerns weren’t banished by a superficially strong U.S. retail sales report for August on Thursday. The only data of note due Friday is the University of Michigan’s consumer sentiment index.

By 6:20 AM ET (1020 GMT), all the major index futures were down by around 0.3%, with losing 100 points, losing 15 points and down around 41 points.

Boeing and Lucid Motors are likely to be under pressure later. They have been reported that one of their pilots may face criminal charges following a false report by regulators regarding the safety of its 737 MAX. Also in focus is Lucid Motors, which continued to gain in premarket after rallying on a positive certification of its electric vehicles’ driving range on Thursday.

4. FDA to review booster shots

An outside advisory panel at the Food and Drug Administration is due to review the risks and benefits of giving Covid-19 vaccine booster shots.

Stocks in vaccine makers such as Pfizer (NYSE:) and Moderna (NASDAQ:) have had mixed fortunes in recent weeks against a backdrop of reports suggesting that the efficacy of their vaccines wanes over time. These companies have used these reports to back boosters which could translate into millions of dollars in extra sales.

Despite an increase in Covid-19 infections in the United States, it is still waiting for this rate to drop decisively. Over 3,400 deaths were attributed to this disease on Thursday. This is the highest number since February.

3.400. Gulf tightness keeps oil prices supported 

Crude oil prices eased slightly but are still on course for their highest weekly close in six weeks, as the continued absence of Gulf of Mexico production continues to squeeze prices higher – all the more so against a backdrop of U.S. inventories that are at their lowest level in three years. The Gulf outages since Hurricane Ida have more than offset the extra oil flowing from OPEC and its allies this month under their stepped scheduled for removing last year’s emergency output cuts.

By 6:30 AM ET, futures were down 0.6% at $72.14 a barrel, while futures were down 0.5% at $75.29 a barrel.

The CFTC’s speculative net positioning data and Baker Hughes’ oil rig count round off the week later.