Thursday, 30 September 2021

Inflation! Inflation!! Inflation!!!

 Baltic Dry Index. 5197 +235 Brent Crude 78.39

Spot Gold 1732

Coronavirus Cases 02/04/20 World 1,000,000

Deaths 53,100

Coronavirus Cases 30/09/21 World 234,072,335

Deaths 4,788,397

“The key challenge is to ensure that we do not overreact to transitory supply shocks,” ECB President Christine Lagarde said at her bank’s premier research conference on Tuesday, and policy “must remain focused on steering the economy safely out of the pandemic emergency” rather than squelching any short-term increase in prices.

At the ECB hosted virtual central bank conference nothing but complacency. Faced with the worst global inflation in 30 years, Fed Chairman Powell Pontificated:

“It’s also frustrating to see the bottlenecks and supply chain problems not getting better — in fact at the margins apparently getting a little bit worse,” he added. “We see that continuing into next year probably, and holding up inflation longer than we had thought.”

But, reassuringly he told the massed ranks of central bankers: 

“The current inflation spike is really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy, which is a process that will have a beginning, a middle and an end.”

And at that pearl of wisdom, the other central banksters fell off their chairs, and began rolling around the floor in uncontrollable laughter. 

More seriously, CNBC tries to spin bad news from China as positive for stocks.

European stocks set for higher open, brushing off market jitters elsewhere

European stocks are expected to open higher on Thursday, unperturbed by declines in Asia-Pacific overnight and U.S. markets on Wednesday.

The U.K.’s FTSE index is seen opening 14 points higher at 7,116, Germany’s DAX 41 points higher at 15,400, France’s CAC 40 up 16 points at 6,579 and Italy’s FTSE MIB 113 points higher at 25,511, according to data from IG.

The solid open expected for European markets comes amid declines elsewhere; overnight in Asia-Pacific, shares traded mixed as investors reacted to the release of Chinese factory activity data for September.

China’s official manufacturing Purchasing Managers’ Index for September came in at 49.6, below expectations for a reading of 50.1 by analysts in a Reuters poll. PMI reading below 50 represent contraction while those above that level signify expansion.

Meanwhile, U.S. stock index futures inched higher during overnight trading on Wednesday, after tech stocks dipped again as investors digest the impact from higher rates.

The tech decline came as the U.S. 10-year Treasury yield hit a high of 1.56% on Wednesday, after rising to 1.567% on Tuesday. The move higher is pressuring tech stocks since it makes promised future cash flows look less attractive.

On Thursday, investors in Europe will be keeping an eye on a number of important data releases including the latest U.K. quarterly GDP figures, French consumer spending data, Spanish retail sales data, German and Italian unemployment numbers and preliminary consumer price inflation data from France, Germany and Italy. The euro zone also releases its latest unemployment data.

China’s power crunch pushes foreign businesses to invest in factories elsewhere

BEIJING — Abrupt power cuts in parts of China are pushing some foreign companies to invest in other countries instead.

In the last several days, many local Chinese governments have restricted power usage, limiting or even halting factory production. The latest curbs come as the country faces a shortage of coal to generate electricity, and regional authorities are under increased pressure to comply with the central government’s call to reduce carbon emissions.

“Some companies were on the fence about investing in China. They choose to not go ahead now,” said Johan Annell, partner at Asia Perspective, a consulting firm that works primarily with Northern European companies operating in East and Southeast Asia.

These planned foreign business investments were in the tens of millions of U.S. dollars, Annell said. While China is still a “very strong destination” for manufacturing, he said the businesses are now looking to invest instead in Southeast Asia, particularly Vietnam.

“The uncertainty — nobody really knows the overall situation, how it’s going to develop, how it’s going to be implemented [in] the coming next few months in exactly your city and your province,” he said, citing the firm’s conversations with about 100 businesses.

Widespread power cuts

In the last week, Chinese cities from those in the southern export hub of Guangdong to Shenyang, the capital of the northeastern province of Liaoning, have ordered restrictions on electricity use with little to no notice. The abrupt moves have prompted a few China economists to cut their GDP forecasts for the year.

For context, Guangdong province produces the most exports in China, at about 23% of the total for this year through August, according to official data accessed through Wind Information. Liaoning province ranks 16th in terms of export value, at 1.6% of the national total.

“This uncertainty in the short term, this is something you can handle it for a week or so and catch up over time,” Annell said. “The bigger issue is this uncertainty. This may very well go on for the coming two quarters.”

“Companies rely on policy stability and predictability,” said Matt Margulies, vice president for China operations at the U.S.-China Business Council. 

“They need advanced notice for disruptions to power supply to ensure safety and business continuity,” he said. “They also need to be consulted with to find nuanced solutions that meet the needs of all stakeholders. A one-size-fits-all approach will be disruptive, increase costs, and hurts confidence in the market.”

China’s Ministry of Commerce deferred a request for comment to a weekly press conference set for Thursday afternoon.


China power crunch slams factories as coal lobby warns 'not optimistic' on supply

SHENYANG, China, Sept 30 (Reuters) - Small firms caught in China's prolonged power and coal crunch are turning to diesel generators, or simply shutting shop, as coal officials voiced fears for stocks ahead of winter and manufacturing shrinks in the world's no. 2 economy.

Beijing is scrambling to send enough coal to electricity utilities to restore full supply, with the worst power outages in years affecting large swathes of the country, especially three northeastern provinces, including Liaoning that are home to nearly 100 million people.

The shortages, now well through their second week, have been triggered by a lengthening surge in the price of coal, China's no. 1 source of fuel to produce electricity, which is now hovering near record levels amid tight supply, tougher emissions standards and strong manufacturing demand up to now.

Business owners in Liaoning's capital city, Shenyang, told Reuters on Thursday they were losing money, as official data separately showed the country's official measure of manufacturing contracted in September - for the first time since February 2020. read more

The strain on firms comes as the China Coal Industry Association warned in a statement that coal inventory at power plants is low, and it is "not optimistic" ahead of the winter peak demand season.


Finally, complacency rules, but don’t panic [yet.]

Fed Chair Powell calls inflation ‘frustrating’ and sees it running into next year

Federal Reserve Chairman Jerome Powell still expects inflation to ease eventually, but said Wednesday that he sees the current pressures running into 2022.

Assessing the current economic situation, the Fed chief said during a panel discussion hosted by the European Central Bank that he was “frustrated” that getting people vaccinated and arresting the spread of the Covid delta variant “remains the most important economic policy that we have.”

“It’s also frustrating to see the bottlenecks and supply chain problems not getting better — in fact at the margins apparently getting a little bit worse,” he added. “We see that continuing into next year probably, and holding up inflation longer than we had thought.”

Inflation by the Fed’s preferred measure is running at its hottest pace in about 30 years. Powell and most of his colleagues say they expect the current pressures to decline back to trend as supply chain bottlenecks ease and demand goes back to pre-pandemic levels. He said Wednesday that 2022 should be “quite a strong year” for economic growth.


Central banks parse inflation risk as turn from pandemic policy begins

September 29, 2021 6:04 AM

(Reuters) - Central banks that launched massive emergency support to fight the pandemic last year are now planning a global turn in the other direction, with gaps already emerging in their perceived risk of inflation, the need to respond to it, and the pace of the likely return to normal monetary policy.

They are confronted with common supply shocks and common risks around a pandemic that continues to shape commerce.

“Globally we are still in for a long process,” of reopening and adapting to the post-pandemic economy, St. Louis Federal Reserve President James Bullard said this week in a Reuters interview.

But the reopening, and particularly the associated inflation, is being felt differently across the developed world, testing officials’ understanding of the post-pandemic economy and their ability to hit a shared 2% inflation target without derailing global growth.

The heads of the world’s four major central banks gather for a mostly virtual European Central Bank forum on Wednesday, and if last year was marked by a uniform rush to stave off the worst, their exit strategies are already diverging.

That’s led to major policy scuffling both in Europe and the United States over how much inflation risk central banks should tolerate as they try to make up for sluggish prices in the years since the Great Recession a decade ago - a major gamble, in effect, over whether the post-pandemic world will work the same as before.

Policy divergence among the world’s major central banks can influence markets worldwide, shifting capital flows, exchange rates and trade patterns. There may even be limits on how far a central bank like the Fed might go in normalizing policy or raising interest rates if major partners like the ECB aren’t moving in the same direction.

It is still early in the transition from the pandemic, but differences are already emerging.

“The key challenge is to ensure that we do not overreact to transitory supply shocks,” ECB President Christine Lagarde said at her bank’s premier research conference on Tuesday, and policy “must remain focused on steering the economy safely out of the pandemic emergency” rather than squelching any short-term increase in prices.

Like the ECB, the Fed is also banking on inflation easing largely on its own. But discussion of the risks has become more prominent, and in projections last week virtually all Fed officials said it was more likely inflation would run hotter than expected than otherwise.


Powell’s continued expectations that inflation is temporary were echoed by European Central Bank President Christine Lagarde, who sat on the panel with Powell, Bank of England Governor Andrew Bailey and Bank of Japan Governor Haruhiko Kuroda.


Global Inflation Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians,  inflation now needs an entire section of its own.

Of course, it’s not 1973, it’s 1975 and we’ve just been run out of Saigon Kabul, with mounting wage inflation, supply shortages, massive energy inflation, and too much new fiat money chasing increasingly scarce goods and services.

The good news, 1975 didn’t have a pandemic!

An economist's guess is liable to be as good as anybody else's.

Will Rogers.

‘This is not 1973’: Economist rules out ‘stagflation’ and persistent price pressures

Published Wed, Sep 29 2021 7:18 AM EDT

Inflation expectations are still being driven by a “temporary spate of supply issues” and there is no sign of continued upward pressure on prices, according to veteran economist Carl Weinberg.

Global stock markets were roiled on Tuesday by a spike in bond yields which saw the benchmark 10-year Treasury yield touch a high of 1.567%.

Along with concern over the U.S. debt ceiling debate in Washington, investors are also concerned about rising consumer prices. Federal Reserve Chair Jerome Powell told the Senate Banking Committee on Tuesday that inflation could persist for longer than expected as reopening pressures and supply chain problems converge.

Speaking to CNBC’s “Squawk Box Europe” on Wednesday, Weinberg, chief economist at High Frequency Economics, said the global semiconductor shortage, bottlenecks at ports and Covid-19 impediments were a “temporary spate of supply issues” rather than systemic inflationary pressures.

“Inflation is a process and not a one-time change in the level of prices, which I think is what we’re seeing right now,” Weinberg said.

“We’re seeing an adjustment to new temporary realities on the supply side but we’re not seeing the stagflation process that we saw in the 1970s recurring again.”

Stagflation refers to a situation first identified in the 1970s in which inflation is high, economic growth slows and unemployment remains consistently high. The problem for economic policymakers in such an instance is that measures to curb inflation, such as wage and price controls or contractionary monetary policy, may further increase unemployment.

Weinberg said he did not yet see a basis for such a scenario, adding: “This is not 1973.”

While acknowledging that a “large segment” of the market believes that inflation will be persistently higher, which in turn is driving up bond yields, Weinberg argued that there are many other factors keeping the U.S. economy imbalanced, “not least of which is Covid.”


‘Unprecedented’ power cuts in China hits homes, factories

Northeastern China is experiencing power cuts because of coal shortages and the tightening of emissions standards.

28 Sep 2021

Power outages in northeastern China have plunged millions of homes into darkness, triggered factory shutdowns and threatened to disrupt the water supply in at least one province.

The Global Times tabloid on Tuesday said the “unexpected” and “unprecedented” electricity cuts in the provinces of Jilin, Liaoning and Heilongjiang were caused by power rationing during peak hours.

The rationing began on Thursday amid coal shortages and took place without advanced warning, the Communist Party-owned tabloid said, adding that the lack of power has sparked public anger and shut down traffic lights and 3G mobile phone coverage in some areas.

A utility in Jilin also warned that the power shortages could disrupt water supplies at any time, while state broadcaster CCTV said a factory in Liaoning had to rush 23 workers to hospital due to carbon monoxide poisoning when ventilators suddenly stopped during a blackout.

“Power cuts eight times a day, four days in a row… I’m speechless,” one frustrated user from Liaoning wrote on Weibo, a Chinese microblogging site.

Another complained that malls were shutting early and a convenience store was using candlelight.

“It’s like living in North Korea,” they wrote.

Power cuts threaten growth

The lack of electricity has also affected industrial production in the world’s second-largest economy, halting operations at factories, including some supplying Apple and Tesla.

Apple supplier Unimicron Technology said factories in two regions were told to stop production from midday Sunday through Thursday, in filings with the Taiwan stock exchange on Monday.

Dozens of other companies, including a parts supplier to Tesla, were also told to halt production this week, according to stock exchange filings.

Meanwhile, Goldman Sachs estimated that as much as 44 percent of China’s industrial activity has been affected by power shortages, potentially causing a 1-percentage-point decline in annualised GDP growth in the third quarter, and a 2-percentage-point drop from October to December.


Sep. 29, 2021  By Tyne Morgan,

The fertilizer industry is swarmed with Black Swan events. From the impacts of Hurricane Ida to political and climate issues entangled in a cobweb of production slowdowns in Europe and China, the Black Swan events continue to stack up.

According to Josh Linville of StoneX Group, on Monday, the Chinese government effectively banned phosphate exports through June 2022.

The news comes as China's production was already throttled by climate emission concerns from production plants. The impact is already being seen with prices, as China accounts for almost one-third of the world phosphate trade.

Prices Near 2008 Highs

The phosphate ban is just the latest in a series of events that are leading to a supply shock for fertilizer ahead of the 2022 growing season. And that supply shock is creating a price spike that can only compare to 2008, with concerns the most recent strains could cause prices to surpass the record-high fertilizer prices farmers saw in 2008.

"In 2008, we had a little bit more of a lead up to it," says Linville. "And we started from a slightly higher price. We started the 2008 saga closer to probably $350 a (metric) tonne NOLA urea, and we spiked out about $825. So, we are not at the historic highs yet, even though it feels like it. We're not quite there. 

The problem with this one, though, is back in 2008, it was all demand driven. We never had problems finding supply, it was just, 'What price are you willing to pay to get your hands on it?' This one is much more supply driven."

Japan’s next leader: Higher wages cure for pandemic doldrums

MITO, Japan (AP) — Fumio Kishida, the man soon to become Japan’s prime minister, says he believes raising incomes is the only way to get the world’s third-largest economy growing again.

Nearly a decade after long-serving Prime Minister Shinzo Abe vowed to “make Japan great again,” Japan is in a holding pattern, stalled both by the pandemic and by chronic problems such as an aging and shrinking population, growing inequality and stagnant incomes.

Topping Kishida’s to-do list is another big dose of government spending to help Japan recover from the COVID-19 shock.

Kishida says he wants to promote a “new capitalism” that would be more equitable, with fairer distribution of national wealth — the only way to get frugal Japanese families to spend more.

“Unless the fruits of growth are properly distributed, a ‘virtuous cycle of growth and distribution’ cannot be realized,” he told reporters after he overwhelmingly was elected leader of the ruling Liberal Democratic Party on Wednesday. “I would like to take economic measures to raise the incomes of many of you.”



Covid-19 Corner

This section will continue until it becomes unneeded.

Researchers: Refer patients for COVID-19 testing based on 7 symptoms

Sept. 28, 2021 / 2:20 PM

Sept. 28 (UPI) -- Seven symptoms can be used to diagnose COVID-19, particularly in areas in which testing kits are in short supply, an analysis published Tuesday by PLOS Medicine found.

People with all seven symptoms -- loss or change in sense of smell, loss or change in sense of taste, fever, persistent cough, chills, appetite loss and muscle aches -- tested positive for the virus more than 75% of the time, the data showed.

Using the seven symptoms as the basis for recommending testing would result in 30% to 40% of symptomatic individuals in England being eligible for evaluation, researchers from Imperial College London said.

If all those eligible were tested, 70% to 75% of positive COVID-19 cases would be detected, they said.

"If we were testing everyone reporting at least one of these seven symptoms, then up to 75% of the symptomatic cases would be identified, hence improving the control of the spread of the epidemic," study co-author Marc Chadeau-Hyam told UPI in an email.

"Where testing capacity is limited, focusing on using these seven symptoms for triage would optimize the positive detection rate," said Chadeau-Hyam, a professor of computational epidemiology and biostatistics at Imperial College.


Experts: 'Living with COVID-19' model unlikely to work in U.S.

Sept. 29, 2021 / 3:01 AM

Sept. 29 (UPI) -- Several European nations have decided to "live with COVID-19" rather than focus largely on trying to eradicate the virus, but that strategy likely would fail in the United States because case levels vary widely across the country -- and because cases overall are too high right now to try, experts say.

"Comparing the United States with other nations may be difficult at best," public health and health policy expert Dr. Erica Lubetkin told UPI in a phone interview.

"We're seeing a lot of variability across the country in terms of infection and vaccination rates, so while some areas may be ready to try living with virus, others are not," said Lubetkin, an associate professor at the City University of New York School of Medicine.

Even though infections are starting to wane, and the outlook is improved for the next six months, many experts believe that much of the country cannot live safely with the virus, and that people cannot return to many normal activities.

"I do not think we should be relaxing policies in most places yet because you have to actually get to the bottom of the epidemic hill, not just cross its peak," epidemiologist Kacey Ernst told UPI in an email.

"The people most susceptible are just now eligible for booster shots and kids still can't get vaccinated, so there are still a lot of susceptible people in the population," said Ernst, a professor of epidemiology and biostatistics at the University of Arizona.

She, like Lubetkin, advocates maintaining a cautious approach.

"Right now, what we're seeing is really a tale of two states, or two types of states," said Lubetkin, whose research has compared the effects of the pandemic response in several countries.

"States with high vaccination rates have lower infection rates and vice versa -- and until that changes, it doesn't make sense to completely relax restrictions across the country from a public health perspective," she said.

Other countries that have seen significant drops in cases, severe illness and death -- Chile, Denmark and Sweden, among others -- have adopted what researchers have called a "living with COVID-19" model.


Israeli mask 99.95% protective against Delta variant, European lab says

Sonovia fabric to be evaluated against Mu strain next


The Israeli mask company Sonovia has released a report from a leading Italian textile-testing laboratory showing that its fabric eliminates the COVID-19 Delta variant particles with over 99.95% effectiveness.

At the announcement of the results, the company’s stock spiked by nearly 30%, company founder Shuki Hershcovich told The Jerusalem Post on Sunday during a meeting at his headquarters in Ramat Gan.

Specifically, the masks were tested by VisMederi Textyle, the same lab that reported earlier that the unique fabric, which is coated in zinc nanoparticles, also protects against the British variant of COVID-19 and H1N1, otherwise known as swine flu.

The lab is next expected to test the fabric against the Mu strain, which carries several mutations to the spike gene and is labeled a “variant of interest” by the World Health Organization, said Sonovia chief technology officer Liat Goldhammer-Steinberg.

The Mu strain has not yet entered Israel, according to any official reports, but Health Ministry officials have warned of its potential negative impact.

VisMederi is a commercial research laboratory located in Italy. It says on its website that the company “currently receives orders worldwide in the field of vaccines, where it conducts analytical testing of biological samples and validation of bioanalytical methods for the pharmaceutical industry.”

Sonovia’s technology uses sound waves to inject silver and zinc particles into the textile that kill bacteria and viruses. The technology is currently being applied to a wide range of products other than its trademark SonoMask, including seat covers for public transportation and airplane seats, bed sheets and pillowcases for the hospitality sector, and clothing.


Next, some vaccine links kindly sent along from a LIR reader in Canada. The links come from a most informative update from Stanford Hospital in California.

World Health Organization - Landscape of COVID-19 candidate vaccines

NY Times Coronavirus Vaccine Tracker

Regulatory Focus COVID-19 vaccine tracker

Some other useful Covid links.

Johns Hopkins Coronavirus resource centre

Rt Covid-19

Centers for Disease Control Coronavirus

The Spectator Covid-19 data tracker (UK)


Technology Update.

With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported.

What could possibly go wrong?

World's biggest clean energy project to power Singapore from Australia

Loz Blain  September 28, 2021

A colossal US$22 billion infrastructure project will send Australian sunshine more than 3,100 miles (5,000 km) to Singapore, via high-voltage undersea cables. Opening in 2027, it'll be the largest solar farm and battery storage facility in history.

Australia's Northern Territory has abundant space and Sun; Singapore is pressed for space, and looking to transition to renewable power. The two could soon be connected in one of the largest and most ambitious renewable energy projects ever attempted.

The Australia-Asia PowerLink project, led by Australia's Sun Cable, plans to create a mammoth "Powell Creek Solar Precinct" on 12,000 hectares of arid land about 800 kilometers (500 miles) South of Darwin. The site, chosen because it's one of the most consistently sunny places on Earth, would be home to a mind-boggling 17-20 gigawatts of peak solar power generation and some 36-42 GWh of battery storage.

To give you a sense of scale, that's nearly 10 times the size of the world's current largest solar power installation, the 2.245-GW Bhadia Solar Park in India, and more than 30 times more energy storage than the last "world's biggest battery" project we covered in February. It's a bit big.

Power will travel north to the coast through overhead cables, and then it'll travel north-west to Singapore via some 4,200 km (2,600 miles) of high-voltage DC submarine cable along the sea floor, making a dog-leg through some of the fiddly islands of Indonesia. It'll supply up to 3.2 GW of dispatchable clean energy, which Sun Cable says will provide up to 15 percent of Singapore's electricity and power up to three million homes.

The environmental benefits will be significant, cutting about 11.5 million tons of CO2 emissions, which the company says is the equivalent of removing 2.5 million cars from the road.

The Australia-Asia PowerLink project has been granted Major Project status by the Australian and Northern Territory governments. The company has completed a Series A capital raise to get things going, and has completed the sub-sea survey process in the 750 km of the route that falls in Australian waters. Indonesia is on board, having recommended the cable route and approved a survey permit.


What we anticipate seldom occurs; what we least expect generally happens.

Benjamin Disraeli.

Wednesday, 29 September 2021

Bond Yields Up. Banksters & Stocks Down.

Baltic Dry Index. 4962 +245 Brent Crude 77.98

Spot Gold 1738

Coronavirus Cases 02/04/20 World 1,000,000

Deaths 53,100

Coronavirus Cases 29/09/21 World 233,558,660

Deaths 4,778,872

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

Winston Churchill.

With no disrespect intended to Winston Churchill, yesterday’s action and the action in the stock casinos since the start of September, look to this old dinosaur market watcher, like the beginning of the end. 

The end of the everything bubble. Dying rapidly under the arrival of what looks to be permanent inflation, aggravated by far too much unrepayable debt accumulated in the everything bubble fueled by all the trillions of Magic Money Tree fiat money poured out since the discovery of the Magic Money Tree forest back in March 2020.

Adding to the arrival of what looks like stagflation, the dearth of political leadership throughout the G-7 West. 

Since being run out of Afghanistan in a rout, America, Canada, and Germany have all entered a political leaderless gridlock. France has been sunk by the arrival of AUKUS.  GB run off the road by a lack of petrol, sky high natural gas prices, an unusually cloudy August and September, plus unusually low winds in the North Sea.

Prime Minister Johnson can huff and puff up a great storm of hot air about leading the world into a new carbonless age of new energy utopia right around the corner, but right now GB, the EU, China, and India, are all facing a bleak energy winter ahead. 

In the USA, it all comes down to how bad the coming winter turns out. Sky high energy pricing will test the winter budgets of many.

Below, what looks to me like the beginning of the end of Easy Street.

Japan’s Nikkei 225 falls more than 2%; Evergrande’s shares surge 10%

SINGAPORE — Asia-Pacific stocks fell in Wednesday trade following an overnight tumble on Wall Street, with the Nasdaq Composite plunging nearly 3% as bond yields rise.

In Japan, the Nikkei 225 slipped 2.45% while the Topix index dropped 2.47%. South Korea’s Kospi declined 1.87%.

Mainland Chinese stocks also saw sizable losses as the Shanghai composite shed 1.79% and the Shenzhen component fell 1.412%.

Hong Kong’s Hang Seng index declined 0.45% by the afternoon. Hong Kong-listed shares of China Evergrande Group, however, surged 10.11% after the developer announced it will sell a $1.5 billion stake in Shengjing Bank to a state-owned asset management firm.

The S&P/ASX 200 in Australia fell 1.2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.23%.

Investors watched the 10-year Treasury yield, which crossed the 1.5% mark on Monday and has continued rising and was last sitting at 1.5375%. Yields move inversely to prices.

The rising yields hit tech stocks overnight on Wall Street, with the Nasdaq Composite falling 2.83% to 14,546.68 for its worst day since March. Tech stocks are hit in an environment of rising yields as the rise in rates makes their future cash flows less valuable, and in turn makes the popular stocks appear overvalued.

Tech stocks in Asia slipped in Wednesday trade, with shares of Japanese conglomerate Softbank Group falling 2.33% and South Korea’s Samsung Electronics dropping 3.01%.

Chinese tech shares in Hong Kong also declined, with Tencent plunging 2.72% and Alibaba slipping 2.52%. The Hang Seng Tech index fell 2.21%.

On Wall Street, the S&P 500 declined 2.04% overnight to 4,352.63 while the Dow Jones Industrial Average slipped 569.38 points to 34,299.99.


Oil prices were lower in the afternoon of Asia trading hours, with international benchmark Brent crude futures down 1.48% to $77.92 per barrel. U.S. crude futures shed 1.55% to $74.12 per barrel.

Evergrande to sell $1.5 billion stake in Chinese bank, as it faces another bond interest payment

Ahead of another interest payment deadline, Chinese developer Evergrande announced it will be selling off a $1.5 billion (9.99 billion yuan) stake in Shengjing Bank to a state-owned asset management firm.

The property giant, which is buckling under the weight of more than $300 billion in debt, has been struggling to raise funds as it faces a $47.5 million bond interest payment deadline on Wednesday. The embattled real estate giant also owes payments to banks and suppliers.

In a filing to the Hong Kong exchange on Wednesday morning, Evergrande said that it has entered an agreement to sell the 1.75 billion shares it owns in Shengjing Bank to the Shenyang Shengjing Finance Investment Group, at 5.70 yuan per share. Those shares amount to 19.93% of the issued share capital of the bank.

Evergrande had earlier already disposed of 1 billion yuan worth of shares in Shengjing Bank.

In the statement, Evergrande said that its liquidity problems have already “adversely affected” Shengjing Bank “in a material way.” Introducing the purchaser – the state-owned Shenyang Shengjing Finance Investment Group – will “stabilise the operations” of the bank, Evergrande said.

Evergrande’s shares in Hong Kong jumped nearly 10% in early trading on Wednesday morning.

Another bond interest payment due Wednesday

The troubles of Evergrande came to the fore after it warned twice in September that it may default on its debts. Fears over whether the firm would default roiled global markets – although U.S. stocks rebounded by the end of last week.

The world’s most indebted real estate company already missed one key $83.5 million coupon payment last week, on an offshore March 2022, $2 billion 5-year bond. Dollar bonds are typically held by foreign investors.

Evergrande has remained silent on the payment due last week, with no announcement made thus far.

However, the company will not technically default unless it fails to make that payment within 30 days of the due date.

Markets are closely watching to see if the firm will meet its next interest payment of $47.5 million due Wednesday for a $1 billion dollar bond that will mature in March 2024.

With investors exiting Evergrande bonds and as prices tumble, yields on this 7-year bond have shot up to 90%, from just around 14% in the beginning of this year. Yields move in the opposite direction from prices.

For the rest of the year, Evergrande has interest payments due each month in October, November and December.

Analysts have said the firm may prioritize domestic investors, who are the main holders of onshore bonds – over foreign investors, who mostly hold the offshore debt.

Fitch downgrades Evergrande and subsidiaries Hengda and Tianji

September 29, 2021