Marketmind: Watch the gas prices soar
A look at the day ahead from Sujata Rao.
A massive week of monetary policy, with some 16 central banks holding meetings and possibly the first rate hike in a developed country – Norway. Not to say that others will follow soon; the Federal Reserve, for example, can keep its own rate hikes at bay. Others like Switzerland and Japan should remain resolutely conciliatory.
In the meantime, other sagas are focusing the attention of investors. Chinese real estate developer Evergrande’s inexorable path to default hits Hong Kong stocks (mainland markets are closed) and pushed Chinese junk bond yields to 14%, the highest in nearly a decade read more .
So this is a firm risk on Monday with European and US equity futures down 1%, following Friday’s gloomy session when the S&P 500 plunged near its one-month low and the VIX volatility gauge hit a one-month high (.SPX).
Much of this is, of course, due to concerns about economic growth and inflation, the debt ceiling arguing in Congress and the still high number of COVID cases.
Which brings us to the other issue of the day – soaring gas prices and the potential impact on inflation.
Already, these have forced some power producers to close their doors and shut down fertilizer factories in Britain. The ripple effects seem inevitable, on sectors ranging from slaughterhouses to supermarkets, as well as higher winter heating bills read more.
The pressure is growing on the authorities – Britain is planning measures to protect businesses and consumers and US manufacturers are urging to restrict exports of liquid gas (LNG). Politics also come into play – EU lawmakers have asked authorities to investigate Russian company Gazprom for market manipulation read more.
Key developments that should provide more direction to markets on Monday:
-Evergrande lenders assess loan losses, renewing credit read more
-Lufthansa’s $ 2.5 billion rights issue leads to a 2.3% drop in pre-market shares
-Rightmove UK house prices September
-German production prices August
-The pro-Putin Russian party wins the electoral majority but loses ground read more
-Canadians vote in terrible elections read more
– Beginning of the UN General Assembly (until September 24)
Reporting by Sujata Rao
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