Global stocks hovered near a record on Wednesday and U.S. and European equity futures climbed as investors bet on a resilient economic recovery from the pandemic. Yields on U.S. sovereign debt rose while the yield on the 10-year Treasuries rose one basis point to 1.32%. The S&P 500 shed a little ground but ended August with its strongest performance over the first eight months of a calendar year since 1997. The large-cap benchmark SPX gave up 0.1% on Tuesday, a day after recording its 53rd record finish of 2021, leaving it with a year-to-date gain to 20.4% which is the strongest year-through-August performance since a 21.4% rise over the same period in 1997. The Nasdaq Composite also pulled back from a record on Tuesday ending 0.04% lower while the Dow Jones Industrial Average DJIA fell 0.1%.
Expectation is that European stock markets are expected to open higher on Wednesday, buoyed by comments from the ECB, but concerns remain about the strength of the global economic recovery. ECB’s Holzmann and Knot both smacked a hawkish tone with Holzmann arguing that as the Pandemic impact reduces, the ECB can reduce the amount of pandemic support and favored reducing the pace of purchases for Q4. However, this could also result in the sooner than expected withdrawal of the central bank’s stimulus, especially after Tuesday’s Eurozone inflation data showed consumer prices increased by 3% in August, far above expectations and the European Central Bank’s 2% target. The ECB would not be able to extend the PEPP envelop as there would not be enough support within the Governing Council. The decision on the PEPP envelop is likely to be delayed till the December meeting when the ECB would have more data on the COVID-19 impact and inflation outlook. In Germany, retail sales slumped 5.1% in July, way below expectations, setting the scene for the release of the latest Eurozone unemployment figures for July and August manufacturing PMI data.
Oil prices rose Wednesday, supported by a larger-than-expected decline in weekly U.S. oil stocks and ahead of a meeting of the group of top producers to determine future production levels. The oil group is expected later Wednesday to confirm the addition of another 400,000 barrels per day of supply each month through December, judging that the market is strong enough to cope with the extra output. At 2:05AM ET U.S. crude futures traded 0.9% higher at $69.11/bbl, while the Brent contract rose 0.8% to $72.21/bbl.
Zambian newly elected President, Hakainde Hichilema is trying to uncover the full extent of its obligations as it prepares to seek a bailout from the International Monetary Fund and begin talks to revamp the African nation’s debt. He claims that “the debt numbers that were being talked about officially are not really the comprehensive numbers. He went on to disclose that an accurate picture of the nation’s debt may help remove a roadblock for talks with bondholders which would also improve chances of a bailout deal with the IMF, a prerequisite for any debt restructuring. President Hichilema’s landslide victory has seen him in control of an economy with a “bigger hole” than he envisaged, having last year become Africa’s first pandemic-era sovereign defaulter. Years of government budget blowouts fueled by over-borrowing left the state with at least $12.7 billion in external debt, according to the most recent official figure. Since his victory Zambia’s $1 billion in bonds maturing in 2024 rose 1.6% to 79 cents on the dollar in London on Tuesday, the highest level since March 2019. President Hichilema’s new team, which he said are the “new kids on the block,” on Friday named Situmbeko Musokotwane as the finance minister, he will be expected to lead talks with the IMF and Zambia’s lenders that range from the Export-Import Bank of China to funds holding its $3 billion of Eurobonds.