First, there is the case of China Evergrande. The Chinese property developer is sinking again as it defaults on its debt interest today. Chinese authorities have not acted yet to save the behemoth - perhaps to send a powerful message to every Evergrande in the country. But a real debacle of the developer would have negative consequences for the Chinese economy, with repercussions in several sectors of activity. Most financiers do not see this as a "Lehman Brothers moment", the bank that symbolized the 2008 crisis. But it is still a major event this fall.
The second hot topic, inflation, is still much talked about, despite by the slowdown in U.S. price increases in August. The worry is now over the surge in energy prices, which is a thorny issue for Western political leaders as winter approaches.
To these two events, we must add debates on the White House policy and the debt ceiling. The first issue is becoming problematic because tensions have arisen in the Democratic camp over the pharaonic spending plan and how to finance it. The fact that the plan is stuck in the Biden camp is not a good sign. Since it comes at a time when the famous federal debt ceiling must be renegotiated, which will require a compromise between the two camps, it is clear that politics will take precedence over economics in Washington.
The sum of these unknowns is beginning to dampen investor confidence as the U.S. central bank takes a position on Wednesday on the content of its future monetary policy. The market still believes that the Fed is preparing to reduce its asset purchase program at the end of the year, while putting off the prospect of a rate hike as long as possible. The choice of words, already so precise, will be all the more important.
Economic highlights of the day:
The German Producer Price Index for August and the NAHB housing index for September are the main indicators of the day.
The dollar is down to EUR 0.8536. The ounce is up slightly to USD 1758. On oil markets, a barrel of Brent crude is trading at USD 74.90 and a barrel of WTI at USD 71.40. In the 10-year sovereign debt market, the T-Bond yield is up to 1.36% and the Bund yield is down to -0.28%. Bitcoin is losing ground at USD 43,280.
* The Boeing Company and Caterpillar fell 1.7% and 1.9% respectively in pre-market trading on Wall Street, as economically sensitive sectors were hurt by renewed risk aversion.
* The Netflix-produced drama series "The Crown" won multiple awards Sunday night in Los Angeles at the Emmy Awards, while the Apple-branded streaming platform swept several awards with the comedy series "Ted Lasso."
* The U.S. highway safety authority, NHTSA, has opened an investigation into 30 million vehicles produced by nearly two dozen automakers because of suspected defects involving airbags made by Japanese supplier Takata, a government document seen by Reuters on Sunday shows. Tesla is down 2 percent in premarket trading.
* The ICC, India's competition authority, believes in an investigation opened in 2019 that Google, the U.S. group's main subsidiary, abused its dominant position in the mobile operating system market, according to a report seen by Reuters.
BHP: Berenberg upgraded from Buy to Hold with a target of GBp 2,300.
BorgWarner: Jefferies downgrades to hold from buy. PT up 9.5% to $47
Canadian National: BMO Capital Markets downgrades to market perform from restricted. PT inches up 2% to C$155
Hill-Rom: Morgan Stanley downgrades to equal-weight from overweight. PT up 3.7% to $156
Innate Pharma: Evercore raises ADR target to USD 10 from USD 6.
International Consolidated Airlines Group: Credit Suisse retains its positive opinion on the stock with a Buy rating. The target price continues to be set at GBp 195.
Lear: Jefferies cut its recommendation to hold from buy. PT up 12% to $171
Naked Wines: Liberum upgraded from hold to sell with a target of GBp 750.
Reckitt Benckiser: Barclays retains his positive opinion on the stock with a Buy rating. The target price is lowered from GBp 9800 to GBp 9500.
Teradata: Morgan Stanley upgrades to overweight from equal-weight. PT rises 30% to $66
Visteon: Jefferies raised its recommendation to buy from hold. PT raised 22% to $116