A look at the day ahead from Dhara Ranasinghe.
From one crisis to another – a major shutdown of the US government is adding to the unease of markets, as it comes amid signs of a sharp turnaround by major central banks and tensions from power shortages in China and problems at property developer Evergrande. Used to be.
For the second day in a row, US Senate Republicans blocked President Joe Biden’s bid by Democrats to halt a potentially crippling US credit default.
With federal government funding ending Thursday and lending authorization ending around October 18, Democrats are trying to tackle the twin financial disasters while trying to advance Biden’s ambitious legislative agenda.
A shutdown in the midst of a public health crisis could result in furloughs for hundreds of thousands of federal workers.
For the markets, the timing couldn’t be worse.
Cash-strapped China Evergrande Group is scrambling to sell some of its assets before another deadline expires to make bond coupon payments to offshore investors. Many sectors of the world’s No. 2 economy are also crippled by power shortages.
Meanwhile, the rally in bond yields has left the global markets restless. Ten-year US yields have risen 20 basis points so far this month, their biggest gain since March.
This morning however, Treasury and European bond markets are on more stable ground, while European and US stock futures are higher. And Sterling, which has overcome fears that the fuel crisis will hurt growth, is also recovering.
Markets will listen carefully to heavyweight policymakers when they speak at the European Central Bank Forum on Wednesday – the ECB’s Christine Lagarde, the Bank of England’s Andrew Bailey and Fed chief Jerome Powell are all on the agenda by 1545 GMT.
Key developments that will provide further direction to the markets on Wednesday:
-Oil falls for second day as supply-driven rally weakens
– Soft-spoken consensus builder Kishida to become Japan’s next prime minister
Japan may start process to sell $8.5 billion shares in Japan Post- Businesshala
– JPMorgan’s Dimon warns a US default would be ‘potentially catastrophic’
– Emerging Markets: Thailand Central Bank
– Euro zone inflation expectations, consumer sentiment
– Earnings of Europe: Next
US Treasury yields set for biggest monthly jump since March