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China Slowdown, Evergrande Default, Europe Energy Prices - What's Moving Markets

EconomySep 15, 2021 06:42AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- China's stock markets fall again on disappointing economic data and the seemingly imminent default of a major real estate developer. Europe's energy prices are now above their record in 2008, while a big drop in stockpiles is also supporting crude oil. U.S. industrial production data for August are due. Here's what you need to know in financial markets on Wednesday, 15th September.

1. Covid-19 hits Chinese economy in August

China’s economy slowed down further in August, under pressure from a spate of Covid-19-driven lockdowns and the lagged effect of measures taken earlier in the year to keep the country’s credit problems under control.

Retail sales growth slowed to 2.5% on the year, much slower than expected, while industrial output growth also slowed more than expected, to 5.3% from 8.4%. Investment in fixed assets slowed in parallel.

While the year-on-year numbers also reflect the rapid improvement in the baseline figures from 12 months ago, they come at a time when a fresh crop of lockdowns in the Fujian province and storms across central China and its eastern seaboard, are threatening to extend disruptions both to consumer spending and industrial production patterns.

2. Evergrande ever closer to the edge

On top of all that, the country’s financial markets are trying to digest what looks likely to be the biggest corporate default in its history.

Developer China Evergrande Group, which has around $300 billion in liabilities, will not be able to make an interest payment on its debt next week, Bloomberg reported the Ministry of Housing as telling creditors. It will also miss at least one principal payment, the newswire reported.

Standard & Poor’s cut its rating on Evergrande’s senior degt to CC, signifying a high likelihood of imminent default. Chinese various stock indices fell by between 0.2% and 1.8%, with the Hang Seng index the worst hit.

3. Stocks set to open higher; industrial production due

U.S. stock markets are set to open a touch higher, recouping some of Tuesday’s losses as a fresh rise in Covid-19 cases continued to cast doubt on the course of the recovery.

The impact of the delta variant wave was apparent in a 9% monthly drop in airfares in August, which contributed to inflation data coming in below expectations on Wednesday.

By 6:15 AM ET (1015 GMT), Dow Jones futures were up 64 points, or 0.2%, while S&P 500 futures and Nasdaq 100 futures were both up 0.3%.

Industrial production data are due at 9:15 AM ET, while weekly mortgage application numbers will be released earlier. Sectors likely to be in focus include luxury goods, where European stocks fell on fears that China’s widening crackdown on inequality could hit sales. Casino stocks tumbled on Tuesday after reports of tighter regulations planned for the Macau gambling industry.

Stocks likely to be in focus include Microsoft (NASDAQ:MSFT), which raised its quarterly dividend and announced a fresh buyback program.

4. Europe energy prices hit all-time record after interconnector fire

European natural gas and power prices hit fresh highs as the squeeze on undersupplied spot markets got worse. The trigger for the latest surge in prices was a fire which took offline an interconnector cable that transmits 2 gigawatts of power from France to the U.K.

In oil price equivalent terms, European gas prices are now above above $150 a barrel, more than even at the height of the price spike in 2008.  Analysts pointed out that a reversal may be coming very soon, given the disappearance of liquidity in spot markets, and the fact that European prices have now risen to a level where it will soon be profitable to divert LNG supplies from the Asian market.

The Kremlin helpfully chipped in with comments that the immediate opening of the Nord Stream 2 pipeline would help ease the squeeze. The pipeline was recently completed but still has to go through rigorous ‘pre-commissioning’ checks that have to be approved by the German regulator.

5. Oil supported by big drop in inventories

Crude oil prices have also hit six-week highs, thanks to a bigger-than-expected draw in U.S. inventories last week, according to the American Petroleum Institute. The API said U.S. crude stockpiles fell 5.2 million barrels last week, compared to expectations of 3.9 million.

The U.S. government’s data are due at 10:30 AM ET, as usual.

By 6:30 AM ET, U.S. crude futures were up 1.6% at $71.58 a barrel, while Brent futures were up 1.3% at $74.56 a barrel.

China Slowdown, Evergrande Default, Europe Energy Prices - What's Moving Markets
 

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Comments (7)
Rosh Jardine
RoshJardine Sep 16, 2021 3:01AM ET
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That evergrande issue is a serious statement by China to wall street guys to lower the price or battle systemic risk..dollar has to rise to push price down
Investing Man
Investing Man Sep 15, 2021 5:11PM ET
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China has a billion people or something. They dont need my investment. My country does.
James Vandervest
James Vandervest Sep 15, 2021 9:55AM ET
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Open higher huh?  Every time  the past week there has been hype and I got burned each time. Today I didn't listen and went with my intuition,  up 2.4%.  China and corona virus is what you were on about. I  dumped everything except my uranium stocks-- because something has to power the "Green New Deal"= and they are finding out it will need nuclear- and the  uranium supply is tightening.. better advice.
Ronald Warren
Ronald Warren Sep 15, 2021 9:55AM ET
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James. If you're into energy, you need to check out Sun Hydrogen. "HYSR" It's gonna' be huge!!
kangroo kiloo
kangroo kiloo Sep 15, 2021 9:03AM ET
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CCP and china virus rot in ***
abel abel
abel abel Sep 15, 2021 8:27AM ET
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let's sell GBPJPY🔥🔥🔥
John Hat
John Hat Sep 15, 2021 8:23AM ET
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China is weak.
Mike ND
Mike ND Sep 15, 2021 8:13AM ET
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China collapse soon
Van Doza
Van Doza Sep 15, 2021 8:13AM ET
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A pleasant dream, but a dream none the less...
Rosh Jardine
RoshJardine Sep 15, 2021 8:13AM ET
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If China collapse..all follows..systemic risk is global risk
 
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