Geoffrey Smith — Treasury bond stability after the biggest single-day sale in months. Jerome Powell, two Fed top officials and others may talk about this later. China Evergrande did not pay its bondholders in time and was technically in default. China’s central banks intervened once again in order to calm the markets before a new statement lashing at cryptocurrency ruffled feathers. As local governments scramble for pollution targets, the Chinese industrial sector is increasingly suffering from power cuts. And Nike (NYSE:)’s earnings disappoint due to sustained factory closures in Vietnam because of Covid-19. This is what you should know about financial markets Friday 24 September. 

1. Evergrande doubts revive; PBoC intervenes again

China Evergrande fell into technical default after failing to pay all the holders of its dollar bonds by the prescribed deadline on Thursday. Although the company is allowed a grace period of 30 days to settle the claims, it will not be officially declared in default if the deadline is met. However, the company already has stopped paying its employees and contractors, so that’s just semantics.

Evergrande stock dropped 11% in Hong Kong. This caused the wider Chinese and European equity markets, as well as other Asian ones to fall again. The People’s Bank of China again injected liquidity to keep the domestic money market orderly, although its intervention was a little smaller that on Wednesday and Thursday. In spite of this, it has injected more than $70 billion during a week that was short on holidays.

The PBoC also made for some concern in cryptocurrency markets as they picked up on an edict restating the bank’s official position that all crypto-related transactions are illegal in China. The crypto universe reacted by sending down 3.2% and down 7.2%. Although the statement looked to date from Sept. 15, it was not.

2. Treasuries stabilize after Thursday sell-off; Powell, Clarida due to speak

U.S. Treasury bonds stabilized after lurching to their highest in nearly three months on Thursday. At 6:15 am ET (1115 GMT), the 10-year yield, at 1.45%, fell to 1.41%.

The move appeared to be a delayed reaction to the Federal Reserve’s policy statement and press conference on Wednesday, where attention had initially focused on the Fed’s decision not to reduce bond purchases immediately. Now, attention has shifted to statements by Chair Jerome Powell indicating that assets purchases could be phased out completely by the middle next year.

It comes amid political theatre over the debt ceiling, two Democratic-led spending bill that would call for a continuous barrage on Treasury issuance.  Powell will speak alongside Richard Clarida, his deputy chairman and Michelle Bowman, Fed governor.

3. Stocks set to open lower; Nike disappointment in focus

U.S. stock markets are set to open the market lower on a fresh bout of nerves about the China debt crisis, and alarm at the sharp rise in bond yields on Thursday.

By 6:15 AM ET, were down 79 points, or 0.2%, while were down 0.4% and were down 0.5%.  Recent Bank of America (NYSE 🙂 fund manager survey that showed first global equity outflows this year will not help sentiment.

Nike is likely to come under scrutiny later. The company warned that there could be shortages of supplies into the holidays season, in a disappointing quarter-end update on Thursday. Covid-19 was responsible for closing factories in Vietnam that make most of its shoes. Puma (OTC) and Adidas (OTC-:) were both affected in the early European trade.

However, Trip.com and Costco (NASDAQ.) both delivered results that exceeded all expectations.

4. U.K. energy, food crisis looms

The U.K. economy is looking a bout of stagflation in the face, as a shortage of truck drivers threatens to hobble deliveries of both food and gasoline for the foreseeable future.

BP (NYSE:) and Exxon Mobil (NYSE:) both said on Thursday they would have to ration supplies of fuel to gas stations due to a driver shortage. Similar problems have been plaguing supermarket chains for several weeks. These latest developments are coming just weeks before the U.K. government will end its pandemic-era Furlough Scheme. This is expected to increase unemployment.

The government is also cutting the temporary 20 pound weekly bump to its ‘universal credit’ benefit program, which will hit the jobless and low paid just as their energy bills are set to soar. In the face of inflation exceeding 4%, the Bank of England said that it expects a rate increase to take place before year’s end.

5. China’s pollution clampdown hits industry; natgas prices resume rally

The energy crisis isn’t confined to the U.K., however. In China, a growing number of factories are having their power supplies cut as part of Beijing’s clampdown on pollution. In the meantime, rising coal prices are making it difficult for power stations in China to supply energy-intensive industries.

Power curbs have now extended to 10 of China’s provinces, Bloomberg cited the 21^st Century Business Herald as saying. These two-pronged effects could slow down China’s economy even further during the last quarter. The curbs have a ripple effect on the chemical, dyeing, and textiles industries.

Prices rebounded overnight after dropping in the middle of last week. The Henry Hub front-month price at the Henry Hub was up 1.9%, at $5.07 per unit mm Btu at 6:30 AM ET.