A look at the day ahead in European and global markets from Gregor Stuart Hunter
China’s property sector is taking centre stage as traders kick off the last full trading week of the year, contending with a calendar strewn with risk events. No fewer than five G10 central bank decisions are due, alongside a slew of delayed economic data releases from the U.S.
Among the central banks making decisions this week, the Bank of Japan is expected to hike rates by 25 basis points to 0.75%, while the Bank of England may make an equal-sized cut to 3.75%. The European Central Bank is expected to keep interest rates on hold, alongside Sweden’s Riksbank and Norway’s Norges Bank.
But markets start the week grappling with news from China Vanke, which said it would convene a second bondholder meeting after failing to secure bondholder approval last week to extend by one year a bond payment falling due today, which has a five-business-day grace period. Shares of Vanke tumbled in Shenzhen and Hong Kong <2202.HK>.
The development increases the risk of default by the state-backed developer and has renewed concerns about the crisis-hit property sector. Official Chinese data showed on Monday that new home prices extended declines in November, indicating that a recovery in demand remains elusive despite the government vowing to stabilise the sector.
Adding to pressure on policymakers in Beijing: The Chinese yuan appreciated to its strongest level in more than a year, after factory output and retail sales data slowed further in November, providing fresh evidence that the economy is stalling.
With the prevailing mood more “lump of coal” than “Santa rally”, investors are taking risk off the table in Asian trading on Monday and booking profits for the year. MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.2%, led by a drop of as much as 2.7% in South Korean shares, one of the world’s best-performing markets this year.
In early European trades, pan-region futures were last up 0.4%, German DAX futures were up 0.4% and FTSE futures were up 0.3%.
Key developments that could influence markets on Monday:
Economic data:
Euro Zone: Industrial Production for October
Debt Auctions:
France: 1-month, 3-month, 7-month and 1-year government debt
(Reporting by Gregor Stuart Hunter; Editing by Sam Holmes)
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