A possible bankruptcy of the real estate group “Evergrande” in China shook international stock markets on Monday. The company has debts equivalent to more than EUR 250 billion and is in urgent need of liquidity. Investors now fear a default, which could have a negative impact not only on Chinese real estate and stock markets. The EuroStoxx 50 fell by almost -3% at times and fell to its lowest level in around two months. At the close, the European benchmark index exited -2.11% lower at 4'043.63 points. Wall Street was also dominated by concerns that a potential crisis in China's real estate sector could “spill over” to the international capital markets. In addition, the tension is now rising before the interest rate decision of the Federal Reserve, which is due on Wednesday evening, on which occasion the Fed could concretize its timetable for a reduction of its quantitative measures. The Dow Jones Industrial fell -1.78% to 33'970.47 points and recorded during the trading day the lowest level since late June. The S&P 500 fell -1.7% to 4'357.73 points. On the Nasdaq, daily losses of around -2% were observed.
In Asia, the short-term sell off seems to have lost some steam, but the level of insecurity and potential higher volatility will remain probably remain high.
According to the Bank for International Settlements (BIS), the major central banks (Fed, Bank of Japan, Bank of England or the SNB) can still “afford” a loose pace in their monetary policy despite the increasing inflationary pressure. The reason is that the higher inflation is mainly concentrated in a few economic sectors and is attributable to pandemic-related special effects as well as statistical base effects due to the low comparative values in the previous year. Against this background, the BIS - in-line with the central banks mentioned above – considers the sharp rise in inflation to be highly unlikely to be sustainable at present. This is the conclusion reached by the BIS after analyzing price developments in 131 sectors of the US economy over a long period of time.
The upward trend in prices in Germany continues to strengthen. In August, for example, producer prices rose by +12% on an annual basis, the highest increase observed since the end of 1974. Prices at producer level had already risen sharply by +10.4% in July and by +8.5% in June compared with the same period a year earlier. The background to this is price pressure for energy and intermediate goods. German producers had to pay an average of around 25% more for energy in August than a year ago. Natural gas, for example, became +45% more expensive.
|14:30||US||Housing Starts (August, m/m)||-7.0%|
|14:30||US||Building Permits (August, m/m)||+2.3%|
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Source: LGT Bank (Switzerland) Ltd.
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