Losing the plot By Reuters
A look at the day ahead from Julien Ponthus
This week was supposed to be all about the so-called ‘dot plot’ and what kind of rate-rise projections U.S. Federal Reserve policymakers might make.
However, Monday’s selling storm was triggered by Evergrande default fears. In addition to headlines generated due to rising gas prices in advance of winter.
Although this may not have been China’s “Lehman moment”, as many claim, there were still concerns about Wall Street’s financial health on Monday. Wall Street was on track for its worst day since March 2020.
The turmoil came despite two extremely positive developments for equities: the relaxation of U.S. travel restrictions which saw airlines shares skyrocket and Pfizer (NYSE:) saying data showed its COVID-19 vaccine was safe and protective in children.
Global markets are now stable, and MSCI’s Asia-Pacific share index outside Japan is down 0.2% while European futures point higher.
This reprieve will end or be short-lived. On Wednesday, the Fed closes its meeting and Evergrande dues bond interest payments.
Investors want to see the Fed sign a “Powell Put”, which is basically that the central banking boss could intervene in order to protect markets. Realistically, not many believe that current market turmoil will alter Fed’s view of when the economy is ready to receive higher interest rates.
The Fed may be focusing on the possibility that a higher-than anticipated inflation rate will lead to the Fed moving the average of its forecasts for interest rates to rise to 2022 instead of 2023.
Key developments that should provide more direction to markets on Tuesday:
– UK public borrowing overshoots forecasts in August
-Britain is considering state loans for energy companies
– Universal Music valued around $39 billion ahead of stock market debut
– Australia c.bank wary in case Delta slows recovery
– Norway to end era of zero interest rates as economy recovers
– Canada’s Trudeau wins another minority in election, claims ‘clear mandate’
– UN General assembly (until Sept 24)
– Biden speech at U.N. to stress U.S. focus on ‘intensive diplomacy,’ official says
Gas prices soar this year https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkjymepx/gasprices2009.PNG
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