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Global Markets Bounce, Central Banks, Universal Music


© Reuters.

By Geoffrey Smith — Global markets bounce as signs of central bank reticence to tighten policy appear, while fears of a dramatic and disorderly collapse of a property empire in China ease a little. Universal Music rises upon its debut, as it is spun off from Vivendi. August’s housing start and permit data are due. Shell’s projections for the Gulf of Mexico are also important. What you need to know for financial markets Tuesday, September 21st.

1. Global markets bounce

Global markets rebounded from Monday’s losses as analysts around the world scrambled to reassure clients that China is not about to experience its ‘Lehman moment’.

The in Hong Kong rose 0.5% while European benchmark stock indices rose by over 1%. U.S. Treasury yields rose slightly and the retreated from the one-month high it hit on Monday.

It is now up to the authorities what they can come up with before markets on mainland China reopen Wednesday, after an extended holiday weekend. China Evergrande is the leading property developer in the crisis. It has missed several payments to banks, and will now have to pay both principal and interest on its bonds starting Thursday.

2. Week of central bank action begins on a dovish note

Also helping sentiment on Tuesday is the growing perception that the slowdown in the world economy due to the Delta variant of Covid-19 in recent months has pushed back the time when major central banks start to tighten monetary policy.

The key event for this week remains the Federal Reserve’s meeting, which begins later Tuesday and concludes on Wednesday. But other central banks already shift towards more dovish positions. Sweden’s Riksbank left any mention of future interest rates unchanged in its monetary policy statement earlier, a softening of its previous guidance. Indonesia kept the same key rate.

The Bank of England is expected to hold off on tightening policy Thursday due to data showing soft growth, retail sales and potential economic impact from the ongoing oil crisis.

3. Stocks set to open sharply higher; Fedex, Adobe (NASDAQ:) earnings due

U.S. stock markets are expected to recoup most of their Monday losses when they open later, on a combination of the above-mentioned factors.

By 6:15 AM ET (1015 GMT), were up 310 points, or 0.9%, while were up 0.8% and were up 0.8%.

AutoZone’s quarterly earnings, as well as FedEx’s (NYSE) and Adobe reports, will likely be the focus of attention later.

At 8:30 AM ET, the only data that is of interest to economists are building permits for August and data on housing starts.

4. Universal Music strikes a happy note

Universal Music soared on its debut after being spun off from its French parent Vivendi, in a strong signal from investors about confidence in the future of the music business.

This gives the company a market capitalization of around 45 billion euro ($52.8 million).

At 6:15 AM ET, the newly listed shares were trading at 25 euro ($29.32), a gain that is 35% over the reference price 18.5 euros/share. The surge supported the stock of other music-exposed names such as Sony (NYSE:), which rose 3.6% in premarket, and Hipgnosis Songs Fund up 0.6% in London.

This deal was made possible by a lot of corporate deal-making. Vivendi will still hold a 10% interest, Tencent Music will have 20%, and Bill Ackman’s Pershing Investments 10%. The 60% remaining was divided among Vivendi shareholders.

5. Oil supported by Shell outage news

Crude oil prices recovered in line with other risk assets, supported by news late on Monday that output from the Gulf of Mexico will remain impaired through the end of the year due to storm damage.

Royal Dutch Shell is the biggest producer of oil in the Gulf. It said that its West Delta-143 platform (which acts as an intermediary for two other platforms producing oil) will resume operation in the first quarter 2022. It stated that 60% of the company’s operations are now online.

By 6:25 AM ET, futures were up 1.2% at $71.00 a barrel, while futures were up 1.0% at $74.59.

The American Petroleum Institute’s weekly inventory data are expected to be available at 4:30 PM ET.