Economic Analysis

There were several central bank meetings last week, and the FOMC and BoE had the most influence on the market. This week we have a lot of important events to watch, including the results of the German elections. This is in addition to the uncertainty about the US debt ceiling and the US infrastructure spending bill. Will Congress be able to raise the debt ceiling by September 30? We also have the Evergrande saga. How much debt does China want to save? What about the energy crisis with the approach of winter, especially in the United Kingdom? Let's review these things below.

central banks

The FOMC's September statement was in line with most expectations, with most of them believing that the Fed will indicate tapering will occur sometime in the near future. They chose to use the phrase "moderation in bond buying may soon be warranted." However, it was the press conference that followed that got traders excited. Powell didn't even mention a start date, however, he did say when the tapering might end! Many FOMC members feel that more significant progress has been made in employment. "My own view is that everything has been achieved."

The Bank of England was not so calm as it was dramatic, although the upbeat comments gave the British Pound positive moves. The Committee noted that "some market tightening during the forecast period may be necessary to be consistent with achieving the inflation target sustainably over the medium term." Additionally, Ramsden joined Saunders as the opposition voter. They voted to reduce total asset purchases to £865 billion from the current amount of £890 billion.

Other central banks worth noting from last week were the Turkish Central Bank, which surprisingly lowered Turkish interest rates from 19% to 18% and sent the Turkish lira to an all-time low.

German elections

Although current Finance Minister Olaf Schulz is expected to be the next German chancellor, his lead has shrunk from a probability of over 80% to 61% at the time of writing. Anything less than a Schulz victory could send the Euro lower.

American Policy

The House Budget Committee will hold an emergency meeting over the weekend for a possible vote on the $3.5 trillion welfare spending package. However, even if the House passes it, there is little chance of it passing to the Senate in its current form. Nancy Pelosi also said the House will take the bipartisan $1.2 trillion infrastructure bill. Additionally, if Congress does not raise the debt ceiling by Thursday, the government will be shut down. Although Senate Minority Leader Mitch McConnell has said Democrats will have to "work on their own" to raise the debt ceiling, Democrats say they won't be solely responsible, as both parties have spent over the years. They feel it should be a bipartisan issue.

Evergrande

It seems that the Evergrande story will not disappear! Earlier last week, Evergrande, China's second-largest real estate developer, said they would make interest payments for bonds issued in yuan. China has started pumping yuan into the markets over the past four days (total 460 billion yuan) in case of any liquidity problems. In addition, China has warned local governments to prepare for a possible downfall of the Evergrande. The company failed to repay their $83.5 million Thursday, and they have another $47.5 million payment this week. The company has many relationships with the national government; Therefore, China is unlikely to let the company fail its domestic payments. However, it may be a different story internationally. There is a 30-day grace period for Evergrande to make its payments.

UK energy crisis?

Cars queued Friday to fill their tanks at petrol stations as some wells dried up. Brent crude rose above $77 a barrel. In addition, natural gas prices rose as the colder months approached. As a result, smaller UK power operators are out of business. Electricity prices have skyrocketed across Europe due to the shortage of natural gas. This may be just the beginning. As the weather cools, prices may continue to rise over the coming weeks and months. Energy commodities such as WTI, Brent and natural gas may continue to rise this week.

The most important economic data expected for this week

This week's economic news kicks off with US durable goods orders for August, which are recalculated based on retail sales data. This metric tells you whether labor shortages and rising prices are affecting manufacturing.

n Monday, the US will publish its economic summary, including durable goods orders for August. The data alone is not likely to cause a major market reaction. Consumer confidence data will also be released on Tuesday.

The US Bureau of Economic Analysis will release the final second-quarter GDP growth figure on Thursday. In addition, the Labor Department will also publish weekly unemployment claims numbers.

In addition to the manufacturing PMI and University of Michigan consumer confidence data on Friday, the Fed's favorite inflation gauge, core personal consumption expenditures, will also be checked for new signs of momentum.