The Day at a Glance | September 24 2021

The Top

*Evergrande payment grace period opens a month of uncertainty after it failed to pay its dollar-denominated bonds.

*Retail sales receded during July (-0.4% m/m; 9.9% annual) and recovered at a slower than expected rate in Mexico.

*The United States House of Representatives speeds up plans to avoid a government shutdown after September 30th.

*China bans all cryptocurrency transactions and is committed to stopping illegal token mining.

*Courts halt suspending Hydrocarbons Law in Mexico, which increases the likelihood of its implementation in 2022.

Economic environment

China monitors Evergrande`s accounts. Chinese company Evergrande Group didn’t pay its dollar-denominated bond interests yesterday, starting a 30 day grace period in order to make the payments or go into default. The news increases fears that China could allow the company to go bankrupt, an idea that has been reinforced by the fact that authorities have assured they are supervising Evergrande`s accounts for there to be enough liquidity to allocate money towards the completion of construction projects and not payment of creditors. This sends signs that foreign investors aren’t the Chinese government`s priority, while those that purchased homes from Evergrande are. The company`s stocks and bonds receded on Friday after yesterday`s recovery. At the moment, the Central Bank of China continued injecting liquidity into the financial system (71 billion dollars; or 460 billion yuan in the last 5 days) in order to avoid Evergrande`s issues to spread into the rest of the market. Regardless of what happens with Evergrande, market agents are warning about a fall in housing prices and a bear market in China`s property market, which would put pressure on markets and the Asian economy. In Europe, Christine Lagarde tried to increase confidence in the market after assuring that European banks` exposure to Chinese companies is very low, or even absent; in the United States, Jerome Powell did something similar during his monetary policy press conference last Wednesday. 20 billion dollars of the company`s debt is owed to foreign creditors.