Global Markets Bounce, Central Banks, Universal Music – What’s Moving Markets

By Geoffrey Smith — Global markets bounce as signs of central bank reticence to tighten policy appear, while fears of a dramatic and disorderly collapse of a property empire in China ease a little. Universal Music soars on its debut as it’s spun off from Vivendi (OTC:VIVHY); housing starts and building permit data for August are due, and oil prices are underpinned by Shell (LON:RDSa)’s forecasts for its Gulf of Mexico assets. FedEx and Adobe (NASDAQ:ADBE) report earnings later. Here’s what you need to know in financial markets on Tuesday, 21st September.

1. Global markets bounce

Global markets rebounded from Monday’s losses as analysts around the world scrambled to reassure clients that China is not about to experience its ‘Lehman moment’.

The Hang Seng index in Hong Kong rose 0.5% while European benchmark stock indices rose by over 1%. U.S. Treasury yields rose slightly and the dollar index retreated from the one-month high it hit on Monday.

Much now depends on what the authorities can conjure up before mainland Chinese markets reopen on Wednesday after a long holiday weekend. China Evergrande Group (OTC:EGRNY), the property developer at the heart of the growing crisis, has already missed a payment to banks and faces both interest and principal payments on its bonds from Thursday.

2. Week of central bank action begins on a dovish note

Also helping sentiment on Tuesday is the growing perception that the slowdown in the world economy due to the Delta variant of Covid-19 in recent months has pushed back the time when major central banks start to tighten monetary policy.

The key event for this week remains the Federal Reserve’s meeting, which begins later Tuesday and concludes on Wednesday. However, other central banks are already starting to shift to more dovish positions. Sweden’s Riksbank left any mention of future interest rates unchanged in its monetary policy statement earlier, a softening of its previous guidance. Indonesia also kept its key rate unchanged.

Analyst notes suggest the Bank of England will also hold off from tightening policy on Thursday at its meeting, due to soft growth and retail sales data and the likely hit to the economy from the ongoing energy crisis.

3. Stocks set to open sharply higher; housing starts due

U.S. stock markets are expected to recoup most of their Monday losses when they open later, on a combination of the above-mentioned factors.

By 6:15 AM ET (1015 GMT), Dow Jones futures were up 310 points, or 0.9%, while S&P 500 futures were up 0.8% and Nasdaq 100 futures were up 0.8%.

Stocks likely to be in focus later include AutoZone (NYSE:AZO), whose quarterly earnings will cast light on whether the spike in used car prices can be sustained, and FedEx (NYSE:FDX) and Adobe, which report after the bell.

Building permits and housing starts data for August are the only economic data of note, both due at 8:30 AM ET.

4. Universal Music strikes a happy note

Universal Music soared on its debut after being spun off from its French parent Vivendi, in a strong signal from investors about confidence in the future of the music business.

That gives it a valuation of some 45 billion euros ($52.8 billion).

The newly-listed shares traded just above 25 euros ($29.32) by 6:15 AM ET, a gain of some 35% on the reference price of 18.5 euros per share. The surge supported the stock of other music-exposed names such as Sony (NYSE:SONY), which rose 3.6% in premarket, and Hipgnosis Songs Fund up 0.6% in London.

The deal was preceded by some furious corporate deal-making activity, at the end of which Vivendi still has a 10% stake, while Tencent Music will hold 20% and Bill Ackman’s Pershing Investments will hold 10%. The remaining 60% was distributed to Vivendi shareholders.

5. Oil supported by Shell outage news

Crude oil prices recovered in line with other risk assets, supported by news late on Monday that output from the Gulf of Mexico will remain impaired through the end of the year due to storm damage.

Royal Dutch Shell, the largest producer in the Gulf, said its West Delta 143 platform, which acts as a transfer point for oil produced by two other production platforms, will resume operations only in the first quarter of 2022. Overall, it said, some 60% of its operations in the region are online.

By 6:25 AM ET, U.S. crude futures were up 1.2% at $71.00 a barrel, while Brent futures were up 1.0% at $74.59.

Weekly inventory data from the American Petroleum Institute are due as usual at 4:30 PM ET.


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