US stocks kicked off the week in the red as the market roiled from the Evergrande fallout. While all the indices pared early losses, they closed well lower with the NASDAQ leading losses, down 2.19%. The DOW and S&P also shed 1.78% and 1.70% respectively. Yield on 10Y USTs closed 5bps lower at 1.3107%, albeit slightly higher than session lows.
Government borrowing fell below forecasts in the first 5 months of the fiscal as economic recovery came in stronger than expected; the £93.8 billion deficit in the period to August was below a projected £125.7 billion. The pound was slightly higher at $1.3676 while yield on 10Y gilts was higher at 0.814%.
Asia stocks continued lower on Tuesday as the Evergrande scenario continues to play out. Japan resumed trading after Monday’s holiday to lead the slide in the region, shedding 2.16%. The HANG SENG recovered from early losses to trade 0.20% higher towards the close of the session while the ASX closed 0.35% higher.
Brazilian economists upped their end-2021 Selic forecast to 8.25% from last week’s 8% in the latest BCB survey ahead of Wednesday’s BCB meeting where the benchmark rate is forecast to go higher by 100bps; the expected full percentage point hike, to 6.25%, will still trail inflation which hit 9.68% in August. The government as well upped its end-2021 inflation projection to 7.9% from a previous 5.9% as inflation continues to show little signs of cooling. The real closed weaker at 5.3253 to the dollar while yield on BRAZIL 30s closed 6bps lower at 3.968%.
The South African economy may grow stronger than expected this year according to the latest note from PwC which sees the economy growing 3% from a previous 2.5% projection; the baseline scenario would see the economy returning to pre-COVID levels in 3 years. The note also pointed to a potential 4.5% growth if projections of power cuts and lockdown restrictions turn out higher, in which case economic recovery will take 2 years. The rand opened slightly firmer to the dollar than Monday’s 14.7832 close while SOAF 30s were about flat at 4.2%.