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European indices end the session with solid gains

Gains of over 1% seen in the European equity markets today

The European major indices are ending the session with solid gains of 1% or more. The provisional closes are showing:

  • German DAX, +1.05%. That was the best session in two weeks.
  • France’s CAC, +1.5%
  • UK’s FTSE 100 +1%
  • Spain’s ibex +1.5%
  • Italy’s FTSE MIB, +1.8%
In other markets as European traders look to exit for the day:
  • Spot gold down $9.28 or -0.52% at $1760.43
  • Spot silver down $0.10 or -0.48% $22.58
  • Crude oil futures up $1.78 or 2.32% at $79.40
  • Bitcoin is trading right around the $50,000 level at $49,990
In the US debt market, the tenure yield has come off the basis point or so from its high level of 1.540%. It currently trades at 1.528%. Other yields are also higher with a steeper yield curve.
US yields are higher but off the highs levels
The USD has seen some selling in the last hour of trading as European traders had for the exits. The USD is trading more mixed after being higher earlier in the US session. The greenback is higher verse the EUR, JPY, CHF and lower vs the GBP, CAD, AUD and NZD.

WTI crude tops $79 for the first time since 2014. What’s next

The oil chart looks better and better

The oil chart looks better and better
Whenever there’s a major breakout like we saw in oil yesterday, there’s always a chance of a false breakout.
One positive sign though was that it came on a newsy day with the OPEC meeting providing somewhat of a catalyst. Today’s price action is another good sign as crude hasn’t just consolidated the move to a new range, it’s extended it.
WTI just touched $79 fro the first time since 2014 and is up 1.75% on the day. I would note that this rally is also coming at what’s usually a poor seasonal time of year for oil.

China’s property market woes set to deepen further

A potential funding crunch beckons for China’s property sector

Fantasia Holdings is the latest name to have missed out on its debt payment today here and it won’t be the last in this entire saga. For some context, Fantasia was downgraded by S&P to CCC and placed on a negative credit watch at the end of September.
Adding to today’s headlines is the credit downgrade for Sinic by Fitch here.
Evergrande may still be the biggest name but the spillovers and broader impact is starting to surface, and it sure ain’t looking pretty.
A Reuters piece from yesterday highlighted that the aggregate interest coverage ratio (in other words, the ability to repay debt) of 21 big Hong Kong-listed Chinese real estate developers fell to 0.94, the worst in at least a decade:
China
That’s rather concerning and the real fear is that Chinese authorities are going to allow for some of these firms to go under (in trying to make a statement) as they continue their quest to deflate the housing market bubble.
As we look towards the weeks/months ahead, expect to see more headlines surrounding this with a funding crunch looking increasingly likely for China’s property sector.

Another Chinese property development firm missed a debt payment

Bloomberg with the report on a missed payment by Fantasia Holdings.

The news was out overnight so it is not new news, posting as an ICYMI.
Says the Bloomberg report (more at that link above (may be gated) )
  • Fantasia didn’t repay a $205.7 million bond that was due Monday, according to a company statement. 
  • Separately, property management company Country Garden Services Holdings Co. said that a unit of Fantasia didn’t repay a 700 million yuan ($108 million) loan that also came due on Monday and that a default was probable. 
  • Shenzhen-headquartered Fantasia’s management and board “will assess the potential impact on the financial condition and cash position of the Group” stemming from the skipped bond payment, it said. 
Bloomberg with the report on a missed payment by Fantasia Holdings. 

CNN report that Biden tells House progressives spending package needs to be between $1.9 tln and $2.2 tln

Via a CNN report, citing two sources

Biden in a virtual meeting with a group of House progressives on Monday
  • said the top line of the social safety net package needs to come down to somewhere between $1.9 trillion and $2.2 trillion
  • Biden told the group, according to one of the sources, that was the range he felt Sens. Joe Manchin and Kyrsten Sinema would accept but did not specify further within that range.
Climbing down from higher numbers earlier. Less fiscal boost will not be as positive for markets looking for stimulus, but on the other hand getting the thing passed will be positive.