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PBoC, German Elections, Natgas Surges


© Reuters.

By Geoffrey Smith — China’s real estate grinds on, but the People’s Bank of China promises again to keep things on track. Following Thursday’s rescheduled vote for the $1.2 billion infrastructure bill, Democratic lawmakers will meet to discuss their differences. GOP senators will continue to exert pressure by refusing to vote on a bill that would allow the government to finance the rest of the week. The global glut for natural gas caused prices to reach a seven-year peak. U.S. durable goods orders for august are due along with remarks from Lael Brainard and John Williams of the Federal Reserve. The European equity gains after Germany’s election point to a slight shift in the direction of the next government. What you need to know for financial markets Monday, September 27th.

1. Relax – the PBoC’s at the wheel

China’s central bank said it will keep local financial markets amply supplied with liquidity and promised a “healthy” development in the country’s real estate market, at the start of a week when China Evergrande faces another dollar payment and other real estate developers are showing signs of stress.

The People’s Bank of China injected another 100 billion ($15 billion) yuan into the money market, twice what it injected on Friday.

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Evergrande shares in Hong Kong rose 7.6% after the company’s electric vehicle subsidiary scrapped a planned stock sale. After Sunac’s planned stock sale, Hong Kong’s listed company fell 7.6%, however.

2. Dems still haggling over spending bills

The House of Representatives pushed back to Thursday a vote on the $1.2 trillion infrastructure spending bill proposed by a bipartisan group of lawmakers, after liberal Democratic lawmakers again insisted on tying it to the broader $3.5 trillion bill on expanding the social safety net and bolstering spending on the energy transition. Democrat lawmakers will meet Monday to discuss their disagreements.

The continued fight over the debt limit has led to Democrats’ inability to come together around a common cause. A deal must be reached before Friday in order to prevent the government from shutting down.

Republican Senators are expected to block a bill later Monday that would extend the government’s funding for another two months.

3. Stocks set to open higher; durable goods, Fed speeches eyed

U.S. stock markets are set to open mixed on relief at the lack of any worse news out of China over the weekend, despite some fears that the U.S.’s political dysfunction could turn truly messy in the course of a critical week. The U.S.-China relationship showed signs of détente on Friday, with the release of Huawei’s chief financial officer from Canadian custody and his return to China.

By 6:15 AM ET (1015 GMT), were up 110 points, or 0.3%. while were up 0.1% but were down 0.3%.

The economic calendar will include data on durable goods orders for August. There will be speeches by John Williams, President of the New York Federal Reserve, and Lael Brainard, a member of the board, at 12:50 ET and 1250 ET respectively.

4. German election suggests modest leftward shift

European stock markets rose after Germany’s national elections pointed to only a modest shift to the left in the next government.

Center-left Social Democrats (SPD), headed by Olaf Scholz as federal Finance Minister, came in narrowly ahead to the right-leaning Christian Democrats. They plunged to the lowest share of votes ever after rejecting Armin Laschet who was chosen to replace Angela Merkel.

The poor performance by the Linke, a far-left party that earlier polls suggested could join an alliance with the SPD and Greens, was greeted with relief. It is likely that the outcome will require the participation of pro-business Free Democrats. It is likely that coalition talks will take some time.

5. Crude, natgas surge on signs of global energy shortage

Crude oil prices rose to their highest since July, while stormed another 4.1% higher to their highest since 2014, amid growing concerns at a global supply/demand imbalance as the northern hemisphere enters the winter heating season.

Competition between Europe and China, as well as other Asian buyers, is driving natural gas prices. This spike has caused coal prices to rise in Asia which is causing financial troubles for Chinese power generation companies. Reports of widespread power shortages in China’s northern regions are raising concern that China’s slowing economic growth will be hit with a double blow.

By 6:30 AM ET, futures were up 1.5% at $75.05, while futures were up 1.5% at $78.47 a barrel.