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Marketmind: Some relief – but how long will it last? By Reuters


A look at the day ahead from Dhara Ranasinghe.

Markets have some relief on Wednesday after China’s Evergrande announced it would pay a domestic coupon.

The U.S. stock markets, the Australian dollar, and the risk-sensitive yuan, are all riding high while U.S. Treasuries and the safe-haven Japanese yen are struggling.

Do not get complacent — Evergrande has yet to make its September 23rd onshore bond payment and it hasn’t indicated whether it will be able to pay the $83.5million in interest it owes on its March 2022 bond. There is no indication that the Chinese government will attempt a rescue operation.

With the U.S. Federal Reserve due to close its two-day meeting Wednesday night, market enthusiasm may be just beginning.

Because gas prices remain high, they are potentially causing consumer price rises. Central banks around the globe will likely be asked to challenge the notion that inflation is temporary.

For the Fed, weaker-than-anticipated jobs numbers have already dampened expectations it will announce an imminent start to tapering bond-buying stimulus.

However, it might clear the path for tapering in the latter part of the year. It will show updated projections whether there is higher-than-expected inflation and a resurgent Coronavirus pandemic that are weighing on the economy’s outlook.

Although the Bank of Japan maintained its monetary policy at the same level, it offered an even more dire view of exports and production. This reinforces expectations that it will not join other countries contemplating withdrawing crisis-mode support.

The House of Representatives approved a bill Tuesday that would fund the U.S. government up to Dec. 3. It also suspends a limit on borrowing until 2022. However, the Senate Republicans have pledged to stop it.

Key developments that should provide more direction to markets on Wednesday:

– Macy’s (NYSE:) to hire 76,000 workers for holiday shopping season

– China keeps lending benchmark LPR unchanged

– DraftKings (NASDAQ:) makes $22.4 bln offer for UK’s Entain

– Euro zone flash consumer confidence

– U.S. existing home sales data

– U.S. sells 2 year FRNs

– Deputy Bank of England governor Sam Woods speaks

– Brazil may raise interest rates by 100 basis points.

– European earnings: Playtech (LON:), IG Group

– U.S. earnings: Nike (NYSE:)

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