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Livesquawk - US Briefing - Wednesday 22.09
US Briefing - Wednesday 22.09
Headlines
  • Fresh Uncertainty For Infrastructure Plan As Democrats Remain Divided
  • ECB’s Muller: ECB Will Discuss Raising Regular QE When PEPP Ends
  • Ifo Cuts German 2021 GDP Forecast To 2.5%; 2022 Raises To 5.1%
  • UK Weighs Joining The USMCA Pact As Hopes For US-Only Deal Fade
  • BoJ’s Kuroda: Don’t Think Evergrande Will Become A Global Mkt Issue
  • Asia Markets Report Cites China CCP To Take Control Of Evergrande
  • China Injects USD18.6B Into Banking System During Evergrande Crisis
  • Australia Tourism Minister Cites: Borders Are To Be Open By Christmas
  • Evergrande Unit Will Make Onshore Bond Coupon Payments On Sep. 23
  • Ofgem Chief Warns That Soaring Gas Prices Might Not Be Temporary
  • Aluminium Prices Soar To A 13-Year High Amid Power Shortage In China
  • API: Crude Draw: 6.1M (est -2.4M); Distillate: -2.7M; Gasoline: -0.432M
  • EU Energy Commissioner: Considering Tools To Prevent Energy Crunch
  • FedEx Drops; As Labour Shortfall Hits Quarterly Profit, Earnings Forecast
  • VW’s Truck Unit Traton Expects Significant Sales Hit From Chip Shortage
  • Mizuho Gets An Improvement Order From The FSA After System Failures
  • UK Has Warned That Food Makers Will See A Sharp Jump in CO2 Costs
Commentary
FOMC: Walking In A Winter Taperland?

September’s FOMC meeting and ensuing rate decision is in the eyes of many analysts a dry run for either a November or December announcement on the start of quantitative tightening.  Economists widely anticipate the FOMC to announce on Wednesday its intentions to hold the benchmark interest rate in the current range of 0% to 0.25% and to maintain monthly asset purchases at USD 120bln (or USD 80bln in treasuries and USD 40bln mortgage-backed securities). Alongside the policy announcement, rate-setters will publish their economic outlook, aka the Summary of Economic Projections (SEP). This happens four times a year and covers forecasts for GDP growth, unemployment, inflation, and the appropriate policy interest rate.  

 

Tapering of the current quantitative easing programme is baked into market expectations, but exactly when it is announced is still up for debate. Danske Bank’s chief analyst, Mikael Olai Milhøj said, “The Fed is in a difficult position amid slower growth and still high inflation. Given the weak jobs report and lower-than-anticipated inflation in August, we expect the Fed will refrain from providing more details at this meeting, as the Fed has already made it clear that tapering is set to begin before year-end.”

(LiveSquawk – Continue Reading)

SNB Expected To Stay The Course On Rates, Guidance

Source: SNB (Swiss National Bank)

The Swiss National Bank is widely expected to hold interest rates at current levels as central bankers around the world consider their next steps now that Covid-19 cases seem to be under control in some countries and regions. Economists say they expect both the main policy and sight deposit interest rates to remain at -0.75%, currently the lowest in the world. Few changes if any are anticipated for the SNB’s forward guidance, and Swiss central bankers are expected to repeat economic projections from the last rate decision in mid-June. Something else that should be the same is SNB President Thomas Jordan’s participation in this week’s meeting.

 

His attendance was in doubt after he reportedly underwent heart surgery last month following a routine check-up, but media reports say he will be on hand to talk monetary policy with the rest of bank’s three-person governing board. And talking will likely be the only thing the trio does this time around for the trio.  David Oxley, senior Europe economist at Capital Economics said rate-setters are expected to “copy and paste the bank’s many oft-used phrases that we know and love.  “Things might [emphasis his] have been a bit more interesting had the meeting been held a month ago, when the franc was at a nine-month high against the euro. As it happens, the currency has dropped by more than 2% since, and fell below CHF 1.09 this week for the first time since July.”

(LiveSquawk – Continue Reading)

Norway Poised To Enact First Post-Crisis G-10 Rate Hike

Source: Norges Bank

Norway’s central bank is poised to raise its interest rate this week in the first such post-pandemic tightening among nations with the world’s 10 most-traded currencies. Responding to a buoyant economic recovery, Norges Bank will lift its benchmark on Thursday by a quarter-point from zero, according to all but one of the 15 economists surveyed by Bloomberg. That places it in the vanguard of the so-called Group of 10 after New Zealand policy makers held off from such a move last month. The decision may also cement the oil-rich economy as the most hawkish member of the pack, contrasting with a more tentative shift expected from the U.S. Federal Reserve on Wednesday toward winding down stimulus. Investors are so certain of a Norwegian increase that they are likely to focus more on signals of further moves next year. 

 

“The September hike is a done deal for sure,” Nordea analyst Dane Cekov said. “It’s all about what the new path signals. If Norges Bank sticks to the current rate path, then I expect Norwegian market rates to fall somewhat.” Norway’s central bank was an outlier already before the pandemic, thanks to the policy space created by its fossil fuel-powered wealth fund. The fiscal aid it provides has helped the Nordic region’s richest economy on a per-capita basis weather the pandemic with a recovery that has outperformed forecasts. 

(Bloomberg – Continue Reading)

Evergrande Yuan Bond Interest Filing Leaves Analysts Guessing

China Evergrande Group injected a fresh dose of uncertainty into financial markets with a vaguely worded statement on a bond interest payment that left analysts grasping for details. Evergrande’s onshore property unit said in an exchange filing on Wednesday that an interest payment due Sept. 23 on one of its yuan-denominated bonds “has been resolved via negotiations off the clearing house.” But the unit didn’t specify how much interest would be paid or when. The filing has triggered speculation among some analysts that Evergrande struck a deal with noteholders to postpone interest payments without having to label the move a default.

 

Chinese companies typically pay interest on local bonds through a clearing house; when they arrange to pay noteholders directly, it’s often because the companies can’t transfer the cash on time or in full, said Li Kai, Beijing-based founding partner of bond fund Shengao Investment. “Usually it will involve extension, payment in instalment or a reduction in the coupon,” Li said. “This is one of the ways to avoid defaults by distressed companies.” Investors around the world are scrutinizing Evergrande’s every move as they try to gauge whether the property giant’s cash crunch will lead to financial and economic contagion. While the knee-jerk reaction to Evergrande’s filing on Wednesday was positive, risky assets including S&P 500 Index futures have since pared some of their gains. 

(Bloomberg – Continue Reading)

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