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PBoC, German Elections, Natgas Surges - What's Moving Markets

EconomySep 27, 2021 21:02
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By Geoffrey Smith -- China's real estate grinds on, but the People's Bank of China promises again to keep things on track. Democratic lawmakers plan to meet to thrash out their differences after a vote on the $1.2 billion infrastructure package is put back to Thursday. GOP Senators are expected to keep the pressure on by blocking a bill later that would extend the government's financing beyond the end of the week. Natural gas prices hit a seven-year high amid a global scramble for LNG; U.S. durable goods orders for August are due, along with speeches from the Federal Reserve's John Williams and Lael Brainard. And European equities gain after Germany's elections point to only a modest shift leftward by the next government. Here's what you need to know in financial markets on Monday, 27th September.

1. Relax - the PBoC's at the wheel

China’s central bank said it will keep local financial markets amply supplied with liquidity and promised a “healthy” development in the country’s real estate market, at the start of a week when China Evergrande Group (OTC:EGRNY) faces another dollar payment on its bonds and other real estate developers are showing signs of stress.

The People’s Bank of China injected another 100 billion ($15 billion) yuan into the money market, twice what it injected on Friday.

Evergrande shares in Hong Kong rose 7.6% after the company’s electric vehicle subsidiary scrapped a planned stock sale, citing a 'serious shortage of funds'. However, the stock of Hong Kong-listed Sunac China Holdings (HK:1918) plunged after it asked for help from a local government that had capped its sales program.

2. Dems still haggling over spending bills

The House of Representatives pushed back to Thursday a vote on the $1.2 trillion infrastructure spending bill proposed by a bipartisan group of lawmakers, after liberal Democratic lawmakers again insisted on tying it to the broader $3.5 trillion bill on expanding the social safety net and bolstering spending on the energy transition. Democrat lawmakers are set for a key meeting to thrash out their differences later Monday.

The failure of Democrats to unite around a common position comes against the backdrop of continued fighting over the debt ceiling. An agreement is needed by Friday to stop the federal government shutting down.

Republican Senators are expected to block a bill later Monday that would extend the government’s funding for another two months.

3. Stocks set to open higher; durable goods, Fed speeches eyed

U.S. stock markets are set to open mixed on relief at the lack of any worse news out of China over the weekend, despite some fears that the U.S.’s political dysfunction could turn truly messy in the course of a critical week. There's also support from signs of detente on Friday between the U.S. and China, which saw the chief financial officer of Huawei released from custody in Canada and allowed to return to China.

By 6:15 AM ET (1015 GMT), Dow Jones futures were up 110 points, or 0.3%. while S&P 500 futures were up 0.1% but Nasdaq 100 futures were down 0.3%.

Durable goods orders data for August head the economic calendar, while there will also be speeches from New York Federal Reserve President John Williams and board member Lael Brainard at 12 PM ET and 1250 PM ET, respectively.

4. German election suggests modest leftward shift

European stock markets rose after Germany’s national elections pointed to only a modest shift to the left in the next government.

The center-left Social Democrats (SPD), led by the current federal Finance Minister Olaf Scholz, emerged narrowly ahead of the center-right Christian Democrats, who plunged to their lowest ever share of the vote in a rejection of Armin Laschet, the man chosen to succeed the outgoing Angela Merkel.

There was relief at the poor performance of the far-left Linke party, which earlier opinion polls had suggested might join a coalition of the SPD and the Greens. As it is, the results will most likely require the involvement of the pro-business Free Democrats in government instead. Coalition talks are likely to take some time.

5. Crude, natgas surge on signs of global energy shortage

Crude oil prices rose to their highest since July, while natural gas futures stormed another 4.1% higher to their highest since 2014, amid growing concerns at a global supply/demand imbalance as the northern hemisphere enters the winter heating season.

Natural gas prices are being dictated by competition between Europe on the one hand, and China and other Asian buyers on the other, for North American cargoes of liquefied natural gas. The spike in prices has also pulled coal prices higher in Asia, adding to the financial problems of Chinese power generators. Spreading power shortages are reported across northern China are now raising fears that the slowing Chinese economy faces a double blow, along with its property problems.

By 6:30 AM ET, U.S. crude futures were up 1.5% at $75.05, while Brent futures were up 1.5% at $78.47 a barrel.

PBoC, German Elections, Natgas Surges - What's Moving Markets

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