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Beyond the Numbers

Bargain Hunting May Lead To Rebound On Wall Street
9/21/2021 8:39 AM

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to regain ground following the sell-off seen in the previous session.

Traders may look to pick up stocks at reduced levels following the weakness seen in the markets over the past several sessions.

The steep drop seen on Tuesday dragged the Dow and the S&P 500 down to their lowest closing levels in two months, while the Nasdaq slumped to a one-month low.

Trading activity may be somewhat subdued, however, as traders look ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

U.S. stocks plunged sharply on Monday, with the major averages suffering their worst setbacks in several weeks, as worries about the potential collapse of China's real estate firm Evergrande dented sentiment.

The Dow ended the session with a loss of 614.41 points or 1.8 percent at 33,970.47. The S&P 500 closed lower by 75.26 points or 1.7 percent at 4,357.73, off the day's low of 4,305.91, while the Nasdaq settled at 14,713.80, recording a loss of 330.06 points or 2.19 percent.

Traders also looked ahead to the Federal Reserve's highly anticipated monetary policy announcement on Wednesday. The central bank is widely expected to leave monetary policy unchanged but could address the outlook for its asset purchase program.

The minutes of the Fed's last meeting signaled the central bank was prepared to begin scaling back asset purchases by the end of the year.

With some recent disappointing economic data suggesting the Fed could push back its plans, traders are likely to pay close attention to the wording of the post-meeting statement.

China's property giant Evergrande, the world's most indebted property developer with more than 300 billion dollars of liabilities, has to pay interests on its bonds with a payment deadline due on Thursday. The company has warned more than once that it could default.

Shares from the metal, energy, financial, semiconductor and housing sectors were under pressure. Technology stocks dropped as well.

Commodity, Currency Markets

Crude oil futures are rising $0.66 to $70.95 a barrel after tumbling $1.68 to $70.29 a barrel on Monday. Meanwhile, after climbing $12.40 to $1,763.80 an ounce in the previous session, gold futures are advancing $10.30 to $1,774.10 an ounce.

On the currency front, the U.S. dollar is trading at 109.45 yen compared to the 109.44 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1739 compared to yesterday’s $1.1726.

Asia

Asian stocks today traded mixed as global markets braced for a tryst with the much-feared "credit event" at China Evergrande, China's prolific property developer. Interest payments on the company's bonds are due later in the week and S&P Global warned that the company was in the brink of default.

Markets were nervous despite lingering hope that China would not let the crisis spiral out of control and waited for any relief measure from the Chinese govt. Traders also waited anxiously for the outcome of central bank policy meetings in the U.S and Japan. Markets in China and Korea remained closed due to local holidays.

Japan's Nikkei 225 index shed 660.34 points or 2.17 percent to close at 29,839.71 as trading resumed after holidays and traders weighed in on the impact of a likely "credit event" at China Evergrande. Meanwhile, Bank of Japan began a two-day policy setting meeting amidst expectations that it would stick to its accommodative monetary policy stance. Traders' speculation on the likely central bank commentary on the domestic economic and foreign trade scenario also impacted sentiment.

Pharmaceutical company Daiichi Sankyo was the top gainer with rallying 7.68 percent, way ahead of Central Japan Railway company that added 3.15 percent. Housing equipment and building materials company Toto was the worst performer with a decline of 6.06 percent. Construction equipment makers Hitachi Construction Machinery and Komatsu shed more than 5 percent.

The Hang Seng Index of the Hong Kong Stock Exchange gained 122.40 points or 0.51 percent from previous close to finish trading at 24,221.54. The day's high was at 24,284.87 and low was at 23,867.16.

Australia's S&P ASX200 gained 36 points or 0.35 percent to close at 7,273.80, around 4.7 percent below its 52-week high of 7632.80. Meanwhile sentiment improved as minutes of Reserve Bank of Australia meeting placed on record expectations of the economy's return to the pre-delta path by second half of 2022.

Energy infrastructure business Ausnet Services rallied 9.75 percent amidst takeover negotiations with Canadian investor Brookfield and rival $10 billion offer from ASX-listed gas pipeline giant APA Group, to become the top performing stock in the index in the day's trading. APA group declined the most in the index with a correction of 4.73 percent.

Wisetech Global that provides software solutions for the logistics industry gained 5.05 percent. Nickel Mines, with principal business operations in Indonesia dropped 4.73 percent after rumours emerged of nickel export tax by Indonesia.

The NZX50 of the New Zealand Stock Exchange shed 1.64 points or 0.01 percent to close flat at 13,176.94. At closing levels, the index was 3.42 percent below the 52-week high of 13643.78.

Vista Group International that offers software for the film industry was the lead gainer, up 3.28 percent. Sports and entertainment media provider Sky Network Television declined 2.43 percent.

Europe

European stocks are up sharply around noon on Tuesday, rebounding strongly thanks to some hectic bargain hunting after recent losses.

Investors, shrugging off concerns about Chinese realty major Evergrande's debt woes for now, are looking ahead to the policy meetings of the Federal Reserve and the Bank of England.

While the Fed's two-day monetary policy meeting gets underway today, the ECB is scheduled to announce its policy on Thursday.

The Fed is widely expected to leave monetary policy unchanged but could address the outlook for its asset purchase program. The minutes of the Fed's last meeting signaled the central bank was prepared to begin scaling back asset purchases by the end of the year.

With some recent disappointing economic data suggesting the Fed could push back its plans, traders are likely to pay close attention to the wording of the post-meeting statement.

Markets are reacting positively to the OECD's economic outlook report showing the Euro Area economy will likely grow 5.3% this year. The earlier projection was for a 4.3% expansion.

Mining and energy shares are among the top gainers.

The pan European Stoxx 600 is gaining 1.04%. The U.K.'s FTSE 100 is surging up 1.21%, Germany's DAX is climbing 1.5% and France's CAC 40 is up by about 1.4%.

In the UK market, Pershing Square Holdings is climbing 5.5%. Royal Dutch Shell is up nearly 5% and BP is up 2.8%.

Antofagasta, IAG, Rolls-Royce Holdings, BHP Group, BT Group, Prudential, IHG, Aviva, Barclays Group, Glencore and Ashtead Group are among the other major gainers.

Kingfisher is down more than 5% despite reporting a surge in first-half earnings.

In the German market, Volkswagen, BMW, Porsche Automobil, Siemens, Allianz, BASF, Infineon Technologies, Henkel and Vonovia are gaining 2 to 3%.

In France, Accor, Air France-KLM, Capgemini, BNP Paribas, Saint Gobain, Teleperformance, LVMH, Technip, Air Liquide, Schneider Electric and Essilor are rising 1.7 to 3.3%.

Universal Music Group's shares soared this morning, as owner Vivendi spun off the record label in the biggest European listing of the year.

In economic news, the UK budget posted its second highest deficit on record for the month of August, data published by the Office for National Statistics showed.

Public sector net borrowing, excluding public sector banks, totaled GBP 20.5 billion in August 2021. This was the second-highest August borrowing since monthly records began in 1993. Nonetheless, this was GBP 5.5 billion less than in August 2020.

UK manufacturing orders grew the most on record in September, with the order book balance rising to 22% in the month from 18% in August, survey data published by the Confederation of British Industry showed on Tuesday.

This was the strongest growth in orders since April 1977.

At the same time, the export order book balance advanced to -2%, the highest since March 2019, from -16% in August.

U.S. Economic Reports

New residential construction in the U.S. increased by more than expected in the month of August, according to a report released by the Commerce Department on Tuesday.

The report said housing starts jumped by 3.9 percent to an annual rate of 1.615 million in August from a revised rate of 1.554 million in July.

Economists had expected housing starts to increase to a rate of 1.580 million from the 1.534 million originally reported for the previous month.

The Commerce Department also said building permits spiked by 6.0 percent to an annual rate of 1.728 million in August from a revised rate of 1.630 million in July.

Building permits, an indicator of future housing demand, had been expected to drop to a rate of 1.610 million from the 1.635 million originally reported for the previous month.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month’s auction of $24 billion worth of twenty-year bonds.
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