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PRECIOUS-Gold rises as Evergrande fears persist, market on standby for Fed

·         Spot gold was up 0.7% at $1,776.09 per ounce by 1:59 p.m. EDT (1759 GMT), while U.S. gold futures settled 0.8% higher at $1,778.20.

·         Gold gained on Tuesday as unease over China’s Evergrande insolvency spurred safe-haven buying, ahead of a Federal Reserve meeting that could provide clues on the central bank’s timeline for cutting its stimulus to the U.S. economy.

·         Safe-haven asset gold has gained on “recent concerns about global economic growth, or more specifically, a Chinese economic slowdown,” which are enough to outweigh a recovery in equities, said David Meger, director of metals trading at High Ridge Futures.

 ·         However, the technical picture for gold “remains near-term bearish”, said Jim Wyckoff, senior analyst at Kitco Metals.

“We may be seeing shorter-term futures traders that have been short maybe evening up and doing some short covering ahead of the FOMC.”

Positive influences from a slip in the U.S. dollar and gains in crude prices were also lifting bullion, Wyckoff said.

 

·         SPDR GOLD HOLDINGS:
NET SELL 0.87 TONNES ON TUESDAY

·         The Federal Open Market Committee will release a policy statement and new economic projections at the end of its meeting on Wednesday. Some analysts believe it could announce the start of the tapering of its asset purchases in the fourth quarter, which could push gold lower.

·         Reduced central bank stimulus and interest rate hikes tend to lift bond yields, raising the opportunity cost of holding non-interest bearing gold.

 

·         “The big question that needs to be answered is will the current market uncertainty change any prospective timeline that the Fed might have when it comes to announcing its tapering of asset purchases,” said Michael Hewson, chief market analyst at CMC Markets UK.

·         Silver rose 1.3% to $22.54 per ounce.

·         Auto-catalyst platinum climbed 4.7% to $953.48, which Meger said was tracking a rebound in equities as a sign of potential economic growth, while palladium gained 1.6% to $1,916.67.

 

·         TREASURIES-Treasuries steady as investors await possible taper hint from Fed meeting

The yield on the benchmark 10-year Treasury note was up 0.8 basis points to 1.318% in morning trade.

 

·         China Evergrande inches close to default deadline, investors wait

China Evergrande Group, once China’s top-selling property developer, inched closer to a key deadline where it risks a default on its bonds, but world markets were calmer as investors and analysts played down the threat of its troubles becoming the country’s “Lehman moment.”

While concerns about the spillover from a messy collapse roiled markets on Monday, U.S. stocks were flat on Tuesday. The U.S. dollar held relatively steady and the U.S.’s corporate bond market steadied.

 

·         U.S. corporate bonds perk up after stock selloff

Like the U.S. stock market, the nation’s corporate bond market on Tuesday steadied one day after fear of contagion risk from debt-troubled China property developer Evergrande rattled global financial assets.

Amid caution ahead of Wednesday’s Federal Reserve policy announcement, Wall Street clawed back some losses from Monday’s selloff and corporate debt offerings were returning after being sidelined by the market volatility, according to Refinitiv’s IFR

A major test for Evergrande comes this week, with the firm due to pay $83.5 million in interest relating to its March 2022 bond on Thursday. It has another $47.5 million payment due on Sept. 29 for March 2024 notes.

Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.

Evergrande missed interest payments due Monday to at least two of its largest bank creditors, Bloomberg reported on Tuesday, citing people familiar with the matter. The missed payments had been expected as China’s housing ministry had said that the company would be unable to pay on time, Bloomberg said.

As investors and policymakers around the world tried to assess the potential fallout, Securities and Exchange Commission (SEC) chair Gary Gensler said the U.S. market is in a better position to absorb a potential global shock from a major company default than it was before the 2007-2009 financial crisis.

 

·         Bank of America cuts China growth forecast under Evergrande shadow

BofA trimmed its real gross domestic product (GDP) growth forecast for China for this year to 8.0% from 8.3%, it reserved its biggest cut for 2022 to 5.3% from 6.2%. It also trimmed its 2023 outlook to 5.8% from 6.0%.

BofA’s cuts come as economic headwinds have been growing for China’s $14.5 trillion economy and reflect growing concern that Evergrande’s troubles could have a wide impact.

 

·         IMF says China has tools to avoid Evergrande's problems becoming systemic crisis

IMF chief economist Gita Gopinath told Reuters the real estate sector was a big part of China's economy, and China Evergrande's potential default could have implications for China's economic activity and financial stability.

"We are following the developments in China very closely," Gopinath said, underscoring the need for regulatory reforms to address the heavily leveraged property sector. "We still believe that China has the tools and the policy space to prevent this turning into a systemic crisis."

 

·         Biden vows a new era of ‘relentless diplomacy’ as the world contends with Covid, climate change and China

 

·         Bill to fund U.S. government, suspend debt limit advances in House

A Democrat-backed bill to fund the U.S. federal government through Dec. 3 and suspend its borrowing limit until the end of 2022, cleared a House of Representatives procedural vote on Tuesday, advancing to a final debate and vote.

 

·         Merkel's Bavarian ally: ECB needs exit plan from zero rates

The Bavarian ally of Chancellor Angela Merkel said on Tuesday consumer price inflation was the biggest challenge facing Germans, calling on the European Central Bank to prepare an exit plan from zero interest rates.

The comments by Markus Soeder, premier of the southern state of Bavaria, come after Friedrich Merz, the conservatives’ key expert for fiscal and economic policies, lashed out at the ECB’s loose monetary policy.

 

·         Bank of Spain raises growth forecasts for 2021, 2022, 2023

Spain’s economy grew at a similar pace in the third quarter than in the previous one thanks to a solid domestic demand and looser COVID-19 restrictions, the Bank of Spain said on Tuesday, raising its forecasts for 2021 and the next two years.

 

·         Germany’s next leader could make or break the economy

With Chancellor Angela Merkel due to leave office after Germany’s federal election on Sunday, the country’s priorities could change dramatically, particularly as power could soon be shared among newer — and more unpredictable — political forces.

It’s practically certain that the next government will be a coalition, as is the current one, but what’s far less certain is which parties will create or dominate a governing alliance.

What form the next coalition takes will undoubtedly have a big impact on Germany’s economy, which is Europe’s largest and arguably most important.

 

·         Britain considers government intervention as gas crisis roils energy firms

The British government is considering bailout loans to help steer energy suppliers through the ongoing gas pricing crisis.

 

·         Surging gas prices are the ‘transition premium’ in the push toward renewables, OPEC chief says

Soaring gas prices are the cost of the attempted shift to renewable energy sources, OPEC Secretary General Mohammed Barkindo told CNBC on Tuesday.

 

·         Australian documents showed French submarine project was at risk for years

 

·         UK calls on China and Russia to agree Afghanistan strategy

Britain will on Wednesday call for China and Russia to agree a coordinated international approach to prevent Afghanistan becoming a haven for militants, according to a statement by British Foreign Secretary Liz Truss at the United Nations.

 

·         Taliban names Afghan U.N. envoy, asks to speak to world leaders

 

·         COVID-19 UPDATES:

 

·         WHO reiterates warning against Covid boosters for healthy people as U.S. weighs wide distribution of third shots

 

·         J&J says Covid booster shot is 94% effective in the U.S. when given two months after first dose