Weekly Recap: 20-24 Sept

The Federal Reserve left rates unchanged after the end of the monthly meeting of the FOMC and stated that if progress in the economy continues as expected, we may see the start of reducing purchases sooner, as some members of the committee indicated that interest rates may rise soon after the start of tapering. 9 of the 18 members expect rates to rise in 2022.

The Bank of Japan (BOJ) announced no changes to its monetary policy settings yet again in September but released the details of its scheme for combating climate change.

Virtuous growth cycle is in place on the back of exports, factory output.
Price trends remain firm.
Will closely monitor economic situation in and outside Japan including tankan and branch managers’ report.
Nervous moves are going on in global financial markets.
Will pay attention to market concerns on China Evergrande.
Corporate sector shows positive growth but household consumption remains weak.
China’s economy is steadily growing, US economy rapidly recovering.
No need to anticipate that slowing US, China economies will cause external demand to falter.
US economy back at pre-corona levels, external demand should remain solid.

The Bank of England’s (BoE) Monetary Policy Committee (MPC) decided to leave the benchmark interest rate unchanged at 0.10% and kept the Asset Purchase Facility steady at £895 billion at the end of September policy meeting, as was widely expected.

BoE votes 9-0 for rate decision; votes 7-2 for QE decision.
Inflation set to rise slightly above 4% this year.
Some developments strengthen case for modest tightening.
Considerable uncertainties remain.
Most cost pressure indicators remain ‘elevated’.
Saunders, Ramsden preferred to reduce gilt buy target to £840 billion.

Evergrand

According to the Wall Street Journal (WSJ), Chinese authorities are asking local governments to prepare for the potential downfall of China’s real estate giant, the Evergrande Group, as reported by Reuters.

Further, bondholders are eagerly awaiting an update on a $47.5 million payment due next week, which also has a grace period of 30 days before it can be called a default.

Canada

Prime Minister Justin Trudeau’s Liberal Party will form Canada’s next government following a tightly contested general election against conservative rival Erin O’Toole.

Trudeau’s ruling party won the Federal election but without securing a parliamentary majority. Trudeau, however, fell short of his target of winning the necessary 170 seats to form a majority government.

Canadian network CTV’s decision desk projects a win for Justin Trudeau’s Liberal Party, announcing Trudeau as the country’s Prime Minister for the third straight term on Tuesday.

Retail Sales in Canada contracted by 0.6% on a monthly basis in July, the data published by Statistics Canada showed on Thursday. This reading followed June’s increase of 4.2% and came in slightly better than the market expectation for a decrease of 1.2%.

Bitcoin

Some crypto holders in China and Hong Kong are scrambling to find a way to protect their holdings of bitcoin and other cryptocurrencies after China’s central bank published a new document Friday outlining tougher measures in its crackdown against broader cryptocurrencies, including enhanced regulations to monitor crypto transactions. .

Bitcoin is down as much as 6% and Ether is down as much as 10%, amid widespread selling early Friday, as investors digested the news.

China’s most powerful regulator on Friday tightened a crackdown on cryptocurrencies by imposing a blanket ban on all cryptocurrency transactions and mining operations, affecting Bitcoin and other major cryptocurrencies and putting pressure on cryptocurrency-related stocks and blockchain technology.

Ten entities, including the central bank and regulators for affairs, securities, and foreign exchange, have pledged to work together to root out “illegal” crypto activity, the first time that Beijing regulators have united to explicitly ban all crypto-related activities.

In May, China banned financial institutions and payments companies from providing services related to cryptocurrency transactions and issued two similar bans in 2013 and 2017.

Europe

European shares rebounded on Friday, September 24th, as concerns over troubled Chinese property developer Evergrande and weak German corporate sentiment data prompted investors to sell for some profits after a mid-week rally.

Shares of European sportswear makers Adidas, Puma and JD Sports each fell about 3 percent after US rival Nike cut its sales forecast for the fiscal year 2022 and predicted delays during the holiday shopping season due to a supply chain crisis.

Retail stocks were the biggest losers in Europe, declining by 1.7%, while the European Stoxx 600 index fell 0.9%.

However, the index’s rise for three consecutive days pushed it to achieve an exponential increase of 0.3%.

Investors’ concerns about Evergrande resurfaced as a deadline for an $83.5 million bond interest payment passed without the company issuing any notice, adding to indications of a possible default.

U.S

New Home Sales in the US increased by 1.5% on a monthly basis in August to a seasonally adjusted annual rate of 740,000, the data published jointly by the US Census Bureau and the Department of Housing and Urban Development showed on Friday. 

The pace of July sales was revised up to 729,000 units from 708,000 units in the previous reading.

Economists polled by Reuters had expected new home sales, which make up a fraction of US home sales, to rise to a pace of 714,000 units.