News

A look at the day ahead in European and global markets from Kevin Buckland

A light calendar for Europe today means markets are likely to take their cues from Asia, and there’s a lot going on – particularly in China.

Property shares are taking a beating after weekend data showed new home sales in China’s biggest cities slumped by half in the first week of this month.

Country Garden, China’s biggest private developer, added to pressure on the sector at the centre of the country’s economic woes as it faces a new round of voting by creditors – the third this month – to avert default, in this case by extending debt repayments to onshore creditors by three years.

Add to that an underperformance in tech shares, after the surprise revelation that Alibaba (NYSE:BABA)’s outgoing CEO is also stepping away from the cloud business, and Hong Kong’s Hang Seng index ended up leading declines in the region, with a slide of about 1.5%.

Mainland blue chips were firmer, though, buoyed perhaps by an easing of deflationary pressures in data released on Saturday.

Meanwhile, China’s central bank yanked the yuan off a 16-year low by setting the strongest official midpoint fixing – as compared with market expectations – on record.

That coincided with the yen’s bounce from last week’s 10-month low after Bank of Japan Governor Kazuo Ueda signalled in an interview with the Yomiuri newspaper that the negative interest rate policy could be on the way out as soon as the year-end.

Despite Europe’s slow start, it’s a busy week, and the focus is mainly on monetary policy.

The ECB sets rates on Thursday, and bets for a hike have been ramping up amid some hawkish comments from officials, along with the rally in crude oil prices.

Those policymakers are now in a blackout period, but not so the Bank of England, which makes its announcement next week on Sept. 21, a day after the Fed.

BOE chief economist Huw Pill is on speaking duty today, setting the scene for British jobs data on Tuesday and GDP the day after.

As for the Fed, the message from officials has been clear of late: They are not itching to raise rates this month, but neither are they ready to declare victory over inflation.

That makes U.S. CPI data due Wednesday the key data point to watch this week.

Key developments that could influence markets on Monday:

-Sweden house price index (Sept)

-Italy industrial production (July)

-U.S. 3-year note auction