Asian equity markets are poised for a mixed trading session, as traders grapple with the latest hawkish stance from the Fed and mounting concerns in the Chinese property sector. The situation with China’s Evergrande has escalated, with the company cancelling a pivotal creditor meeting and abandoning its USD 35 billion debt restructuring plan. Evergrande cited an ongoing investigation into its subsidiary, Hengda Real Estate, and declared its incapability to issue new debt under the current circumstances. This development led to reports of the company defaulting on interest payments on bonds, consequently weakening the Yuan and prompting the selling of domestic stocks and bonds. Traders are maintaining a cautious risk appetite, anticipating additional support for the sector from Chinese officials ahead of the Golden Week holiday.
Attention is also turned to the US, where Congress is reconvening with a narrow four-day window to approve a short-term funding measure to avoid a government shutdown on Saturday. House Speaker Kevin McCarthy is pushing to pass the Fiscal Year 2024 spending bill before resorting to a Continuing Resolution to prevent a shutdown. However, the viability of this approach is uncertain due to the Senate’s position and potential implications for McCarthy’s role. Amid these multifaceted market dynamics, the Dollar experienced a significant uptick, responding to elevated US long-end yields, which reached their highest levels since early 2009, marking a +22bp increase since last week’s hawkish FOMC decision and its accompanying dot plot. The impending possibility of a US government shutdown, highlighted as a potential credit negative event by Moody’s, will continue to influence short-term price fluctuations. Furthermore, price action is likely to be significantly impacted by month and quarter-end trading activities.
