The markets are recovering as Evergrande fears a relaxation; CO2 restart will cost “tens of millions” – business live | Business


Hello and welcome to our continued coverage of the global economy, financial markets, euro area and business.

Britain has struck a deal to revive the pumping of carbon dioxide, but it won’t be cheap.

Overnight, the UK struck a deal with CF Industries to get the US company to restart production of carbon dioxide (CO2) in two fertilizer factories, facing a crisis that threatened to disrupt the food industry.

It will see the government providing “limited financial support” for the operating costs of CF Fertilizers for three weeks while the CO2 market adapts to world gas prices.

And the bill is expected to run into the tens of millions of pounds, Environment Secretary George Eustice said this morning.

He told Sky News:


“It’s going to be in the millions, maybe tens of millions, but it’s to support some of these fixed costs.

They are large, expensive plants.

“We need the market to adapt, the food industry knows that there will be a sharp increase in the cost of carbon dioxide”,

Eustice added that if the government had not acted there would have been food supply issues (producers warned consumers would soon see shortages otherwise) and animal welfare issues.


You would have a lot of chickens on the farms that couldn’t be slaughtered in time, and probably should be euthanized on the farms, we would have a similar situation with pigs, so there would have been a real animal welfare issue here. , and a big disruption in the food supply chain, so we felt we had to act. ”

But the food industry is also facing significantly higher carbon dioxide prices, he added:


“We need the market to adapt, the food industry knows that there will be a sharp increase in the cost of carbon dioxide”,

Also coming today

Financial markets focus on Chinese real estate group‘s debt crisis Evergrande, which faces critical bond repayments this week.

Overnight, Evergrande said it struck a deal with the domestic bondholders, who owe a coupon worth around $ 35.9million (£ 26.3million).

It allayed some fears the company could collapse, sending shockwaves through the Chinese real estate industry and beyond.

But, there was no mention of his plans for an $ 83.5 million interest payment on a foreign bond that is also due Thursday.

China’s central bank has also rushed into action, pumping 120 billion yuan (£ 13.6 billion) into the banking system to strengthen the financial system amid concerns over the debt crisis in China. Evergrande.

This reassured investors – helping the Chinese CSI 300 index recover from the steep initial losses when it reopened after a holiday (it is now only down 0.7% today).

Reuters explains:


The main unit of the China Evergrande group said on Wednesday that it would pay a coupon on its domestic bonds on September 23, offering some relief to nervous markets worried that a default by China’s No.2 developer could spill over to the world. financial system.

Hengda Real Estate Group said in a statement that it will make the coupon payment on its 5.8% Shenzhen-traded bond in September 2025 on time on September 23.

The announcement comes as Evergrande, once the country’s best-selling developer, nears a key deadline for paying interest on a dollar bond, with financial markets strained even as investors and investors alike. Analysts have played down the threat that his problems will become the country’s “Lehman”. moment.”

Hengda Real Estate’s coupon payment is 232 million yuan ($ 35.88 million), according to data from Refinitiv.

“We’re still trying to figure out what this payment means for the other bonds but I imagine they would want to stabilize the market and make other coupon payments, given the scrutiny,” said a source close to the situation that refused to be identified as they are not allowed to speak to the media

And then tonight, the US Federal Reserve is releasing new economic forecasts and dot-plot projections for rising interest rates.

Investors will be looking for signs that the Fed’s Open Market committee is ready to start phasing out its stimulus program for bond purchases by year-end, or expect increases. faster interest rates.

Elsa Lignos of RBC Capital Markets said:


The FOMC is likely to take a further step in the direction of tapering. We still believe the kickoff will finally be given to the November or December meeting, so we don’t expect full details to be released at that meeting.

From our goal, the most important thing to come from this meeting will be the points. The points are ready to move, even if the median does not. By 22, the median will increase if only two managers who are currently not expecting a hike increase their estimate. In 23, it would only take one official who is currently at the median for the median to increase. But whether or not the medians change, our feeling is that directionally the underlying movement of the points will be for more hikes at this point.

We will also get the ’24 point for the first time. We’d expect the first take here to likely show two more hikes. What is the risk? That the Fed posts fewer increases than we think (especially in 24) and anything but cements what appears to be a growing discussion that the Fed is proposing a much lower terminal rate than its estimate of funds at long term (which currently sits at 2.5%. Our US economist argues (and we agree) that economic performance may not give the Fed the luxury of going so slow, or ending as low.

Markets should open higher:

IGSquawk
(@IGSquawk)

European opening calls:#FTSE 7001 + 0.29%#DAX 15,392 + 0.28%#CAC 6,575 + 0.34%#AEX 789 + 0.31%#MIB 25435 + 0.32%#IBEX 8802 + 0.53%#OMX 2,285 + 0.43%#STOXX 4,107 + 0.24%#IGOpeningCall


September 22, 2021

Agenda

  • 10:30 am BST: hearing of the Trade, Energy and Industrial Strategy Committee on the energy crisis in the United Kingdom
  • 3 p.m. BST: monthly US home sales for August
  • 7 p.m. BST: US Federal Reserve decision on interest rates and economic projections
  • 7:30 p.m. BST: US Federal Reserve press conference

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