Marketmind: China developers catch break, BOJ hawks take flight

12:39 am Tuesday, September 12th, 2023

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

Chinese property stocks and Japanese government bonds put on a two-ring show in Asia to start the global day on Tuesday, setting the tone for Europe.

The Hang Seng’s property index kicked off trading by dropping as much as 2.6% to a fresh September low, but reports that Country Garden won creditor support to delay onshore bond payments by three years saw the index catapulted to gains of more than 1%.

The drama isn’t over: Sources say the extension applies to six of eight bonds under discussion, with voting delayed on the other two. The embattled developer has already dodged default twice this month, winning a three-year extension on offshore bond payments and making a last-minute coupon payment.

Meanwhile, Bank of Japan boss Kazuo Ueda’s weekend comments that the end of stimulus is possible during 2023 is still reverberating in the local bond market, with the benchmark 10-year yield pushing to a new near-decade peak.

It puts massive attention on the BOJ’s policy meeting next week, in an important week that also sees policy meetings by the Bank of England and the Federal Reserve.

The ECB, of course, kicks things off on Thursday, and markets are braced for a possible hike after hawkish rumblings from officials recently – although the odds still stand at close to a coin toss.

By contrast, the predominant view is for the Fed to forgo a hike again on Sept. 20, but eyes are trained on tomorrow’s CPI data to see if inflation is playing ball.

Today, the focus for macro data watchers is the British jobs figures, followed by GDP tomorrow.

Overnight, BOE uber-hawk Catherine Mann warned it’s too soon to stop raising rates. Traders certainly lean toward a quarter-point hike next week, putting the probability at about 80%. But they’re split on the chances of another, laying just north of 50/50 odds of one by March.

Key developments that could influence markets on Tuesday:

-UK payrolls data (Aug)

-Spain CPI (Aug)

-Germany ZEW surveys (Sept)

-US 10-year note auction

(Editing by Sam Holmes)