A look at the day ahead from Karin Strohecker.
It’s deadline day for China’s embattled property giant Evergrande, labouring under a $305 billion mountain of debt, to pay its coupon on a dollar bond or career towards default – a prospect that has sent chills through markets.
Whether or not the payment is made, few harbour hopes that China’s overextended property sector – a dominant force in Asia’s corporate bond market – will escape disruption. In turn the hit to the country’s financial system, commodity imports and economic growth is bound to be felt globally.
And there’s little solace to be had from a more hawkish Fed, likely beginning to trim its monthly bond purchases as soon as November. At the end of two-day meeting on Wednesday, the Fed also signalled interest rate increases may follow more quickly than expected as its turn from pandemic crisis policies gains momentum.
Autumn storm clouds are also gathering elsewhere with the U.S. debt ceiling nearing and the flu season approaching fast in many parts of the world.
But for today, optimism prevails.
Evergrande shares rose as much as 32% in Hong Kong after its chairman sought to reassure retail investors, many Asian markets are trending higher. Both European and U.S. stocks futures point to cautious gains with crude oil futures rising and the dollar taking a breather.
The central banking marathon continues with policy makers in the U.K., Switzerland, South Africa, Turkey and Norway all due to give their verdict. Norway is set to become the first major western central bank to deliver post-pandemic rate hikes.
Data on PMIs coming in from around the globe meanwhile should give markets more hints to gauge the economic trajectory ahead.
Key developments that should provide more direction to markets on Thursday:
– Evergrande seeks to reassure retail investors as key debt deadline looms
– Central banks: Norway, UK, Switzerland, South Africa, Turkey, Taiwan, Philippines
– Bank of England expected to keep rates steady as inflation risks mount
– Fed issues quarterly accounts
– U.S. weekly initial jobless claims
– Auctions: US 4 week bills, 10-yr TIPS
(Reporting by Karin Strohecker, editing by Dhara Ranasinghe)
