Global stock markets on Tuesday clawed back losses from the heaviest sell-off in months as investors bet that policymakers would step in to prevent a calamitous fallout if the Chinese property developer Evergrande defaulted.
Evergrande’s US dollar bonds have also tumbled in price to highly distressed levels ahead of a crucial interest payment due on Thursday. But analysts now widely expect Chinese policymakers to act to prevent contagion.
The Evergrande crisis had spurred a retreat to the relative safety of core government debt. However, by Tuesday bond prices were steady.
Meanwhile, the FT reported that funds managed by BlackRock and HSBC added to their holdings of Evergrande bonds just months before a liquidity crisis at the Chinese property developer pushed it to the brink of default.
BlackRock in August bought up five different Evergrande dollar bonds through one of its high-yield funds, which had holdings in the developer then worth $18m, Morningstar data show. The size of the holding had already expanded sharply this year as the fund’s assets under management rose.
In our Unhedged newsletter, Rob Armstrong argues that the main worry from the Evergrande crisis is about growth, not contagion. Sign up here to receive Unhedged in your inbox.
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Five more stories in the news
1. IEA urges Russia to ramp up gas supply to Europe The International Energy Agency has called on Russia to send more gas to Europe to help alleviate the energy crisis, becoming the first major international body to address claims by traders and foreign officials that Moscow has restricted supplies.
Go deeper: Asian buyers are winning a bidding war for American natural gas, undercutting hopes in Europe that US exports will be a quick fix for the continent’s fuel supply crisis.
2. UK pins hope on joining US, Mexico and Canada trade pact British officials said yesterday shortly before Boris Johnson, UK prime minister, was to meet President Joe Biden that the UK was considering applying to join USMCA, the trade pact was signed by Donald Trump, as hopes fade for an imminent bilateral agreement with Washington.
3. US imposes sanctions on SUEX crypto exchange The US Treasury has imposed sanctions on a cryptocurrency exchange that it says allowed ransomware hackers to launder extortion payments from victims, in one of its most significant interventions to date against a digital asset group.
4. ECB official and OECD warn of rising inflation risks Inflation will continue to rise over the next two years, according to revised projections by the OECD, which expects price increases to be significantly higher in 2021 and in 2022 than it previously forecast for most G20 countries.
5. DraftKings makes bid to acquire UK rival Entain The US fantasy sports and sports betting company has made a roughly £16.6bn offer for the UK gambling company Entain, the second time this year a rival has sought to acquire the business and consolidate the fast-growing US market.
Coronavirus digest
China reported another 42 new local cases of Covid-19 in its outbreak in Fujian province on Tuesday, with the daily infection numbers continuing to fluctuate.
Victoria reported 603 new local cases of Covid-19 on Tuesday, as the Australian state’s capital saw aggressive anti-lockdown protests.
A booster of the Johnson & Johnson coronavirus vaccine increases protection against symptomatic Covid-19 to 94 per cent, the company said on Tuesday.
Treating the growing numbers of unvaccinated patients is fuelling compassion fatigue and resentment among US health workers, writes Patti Waldmeir.
Here is how Joe Biden finally, and unexpectedly, came round to relaxing Covid travel curbs for the vaccinated.
Was Joe Biden right to relax travel restrictions for fully vaccinated foreign passengers? Share your view in our latest poll.
The day ahead
Federal Reserve monetary policy meeting concludes The Federal Reserve will offer forecasts on when interest rates will begin to rise at the conclusion of its two-day Federal Open Market Committee meeting today. Policymakers are also expected to offer clues on the stimulus taper timeline.
EU energy ministers meet Officials will meet today to discuss national responses to a surge in wholesale gas prices, amid concern that they will jeopardise Europe’s post-pandemic economic recovery and undermine Brussels’ plans for ambitious but costly green reforms.
Tech executives appear before UK Treasury Committee Representatives of major online platforms Google, Facebook, Amazon and eBay, will appear before the Treasury Committee as part of the UK parliament’s review of progress in combating economic crime such as money-laundering.
What else we’re reading
Toshiba heads for showdown with restive investors An already romance-free honeymoon between Toshiba and its activist shareholders is at risk of a full breakdown. Japan’s oldest conglomerate is under pressure from its largest investors to pull off a radical restructuring or a private equity deal and deliver the 50 per cent share price boost that activists believe will correctly value the company.
Garage scientists’ DNA gamble The growing accessibility of gene-editing tools has led to an explosion of unchecked experimentation in biological self-improvement in recent years. Once a quirky subculture, garage scientists’ rogue mindsets are starting to generate consternation among specialists and international bodies.
The hidden cost of powerful buyers and cheap prices There has been a cost to supply chain resilience. A system without slack, where suppliers and workers are stretched to the max by powerful buyers, may be efficient most of the time. But, as we have just discovered, when there is a shock, such a system can quickly fall apart, writes Sarah O’Connor.
Phones, cars and the future The car has proved stubbornly slow to change in more than a century. Similarly, the conventional thinking around smartphones is that innovation has stalled. Yet the more Tim Bradshaw thinks about their evolution, the more he sees parallels that point to the way ahead.
Investment Masterclass with the Naked Trader In the latest episode of the Money Clinic podcast Robbie Burns, better known as the Naked Trader, shares his top tips for getting into share trading. Forget about being a day trader, he says, you need to let the money come in slowly and take a serious, business-like approach if you want to succeed.
Film
Love affairs, like many things, are subject to the laws of time and change. So film critic Nigel Andrews is still a little blown away by the fact that he is still blown away by Spirited Away, the Japanese animation film on which he once bestowed six stars out of five. “It was love at first sight. It still is love, on umpteenth sight,” he writes.
Source: Economy - ft.com
