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Citi
European Open
The risk appetite continues to sour on China/Evergrande contagion fears, with pre-Fed anxiousness adding further insult to injury. Our Asia Strategy team notes two main channels of Evergrande’s contagion: Sentiment and Slowdown. While the sentiment channel of contagion is likely to have limited impact for EM Asia FX and rates, the second order impact from protracted China growth slowdown would be negative. Looking ahead, with most of Asia (CNY, TWD, KRW) remaining on holiday, liquidity may continue to be a challenge. Event-wise, investors can look forward to the start of a string of central bank announcements this week (SEK, IDR, HUF), with only HUF expected to make a move. Central bank guidance (AUD, EUR) is also due in the form of minutes and speeches, while USD lacks any top tier events.
USD: In line with Citi’s US economists, we expect the September FOMC to signal, but not announce, tapering in the coming months and median dots to suggest one hike in 2022 and two more in 2023. – A dovish surprise would be for the 2021 dot to remain unchanged, while significantly many dots suggesting two hikes in 2022 or four or more in 2023 would trigger a hawkish reaction. – We see slight rates and USD upside into the SEP, but expect Chair Powell to moderate any hawkish read of the dots in the press conference.
Credit Agricole
Asia overnight
Investors remain concerned about Evergrande’s interest payment due on Thursday and the FOMC meeting outcome on Wednesday. Nonetheless, sentiment stabilised in Asia with S&P500 futures heading higher as dip buyers emerged. A modest majority of Asian bourses were trading higher at the time of writing. HK equities were still in the red, but property developers’ shares steadied after they disputed reports saying they were being pressured by the Chinese government. Japanese equities played catch up after a holiday on Monday and fell. Strong oil prices led to the CAD and NOK being the top performers in the G10 in the Asian session. The Canadian election looks to be generating status quo, which also supported the CAD. The JPY was the weakest performer during the Asian session.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.