Biden on Taiwan, NAHB Survey, Crypto Slump
© Reuters By Geoffrey Smith
Investing.com — US President Joe Biden is again warning China that US forces will defend Taiwan in the event of an “unprecedented attack”. Britain closes its markets as it bids farewell to Queen Elizabeth II. Cryptocurrencies fall as investors can’t stomach a week of aggressive central bank action and Volkswagen values Porsche unit at up to $75 billion. Here’s what you need to know in the financial markets on Monday 19 September.
1. Biden-Taiwan
President Joe Biden reiterated that US troops would defend Taiwan in the event of an invasion from mainland China, prompting another angry response from Beijing.
Biden appeared to leave no room for misunderstanding, giving the same answer twice when pressed. However, the White House again felt the need to issue a separate statement later that reiterated that this was Biden’s personal view, rather than official US policy.
Historically, the US has avoided taking a line on that issue, while supporting Taiwan in every other way.
The question of how far the US will risk war with the People’s Republic of China has become increasingly pressing this year as Beijing has stepped up its rhetoric of “reunification” with Taiwan, while the US has offered significant military aid to Ukraine to help it defend itself against Russian attack.
2. Crypto decline ahead of central bank meetings
fell to a three-month low at the start of a week that is likely to see a significant tightening of global monetary policy.
Momentum has ebbed from the cryptocurrency since last week’s US August led to speculation that the Federal Reserve could raise its key rate by 100 basis points later this week, instead of the 75 basis point consensus. Other large increases are also expected from Sweden, Norway, Switzerland and the Bank of England.
Sentiment has not been helped by the failure of Ethereum’s long-awaited “merger” to result in an immediate surge in demand for the network’s native token. Ether fell 9.3% overnight to a two-month low of $1,298.62, while Bitcoin fell 7.2% to $18,489.00.
3. Stocks set to extend losses at open; VW sets Porsche’s valuation range
US stock markets are set to open under the same cloud of reduced risk appetite, extending last week’s decline.
As of 6:20 a.m. ET (10:20 GMT), it was down 301 points, or 1.0%, while was down by the same amount and was down 1.1%. The three cash benchmarks had lost between 4.8% and 6.7% last week, their worst week in three months.
Stocks likely to be in focus later include AutoZone (NYSE: ), which is set to report earnings. Volkswagen AG ADRs (OTC:) will also be in focus, after the company announced the price range for the IPO of the Porsche unit. VW is aiming for a valuation of up to 75 billion euros ($75 billion) with the spin-off, which it hopes will unlock value and help it fund its transition to electric mobility.
The monthly housing market report is the only note on the data calendar.
4. Great Britain buries Queen Elizabeth II
World leaders descended on London for the funeral of Queen Elizabeth II. British markets closed for the day, dampening trading across most of Europe.
However, it continued to trade, losing 0.4% to $1.1366, testing the 37-year low it did on Friday after August’s dismal data.
The data pushed market participants to expect the Bank of England to hike by just 50 basis points at its rescheduled Monetary Policy Committee meeting later this week. Sterling is also under pressure due to uncertainty about the direction fiscal policy will take under the new government of Prime Minister Liz Truss.
5. Oil slips on demand concerns
Crude oil prices fell further below $100 on concerns about the state of the global economy, with expectations of further weakness in China despite the lifting of Covid-19 restrictions in the mega city of Chengdu late last week.
By 6:30 a.m. ET, futures were down 1.9% at $83.10 a barrel, while they were down 1.9% at $87.91 a barrel, testing a seven-month low. There was little support even from a report that said OPEC and its allies missed their monthly production target by more than 3.5 million barrels last month.
Prices also continued to slide, as traders took a more optimistic view of Europe’s chances of getting through the winter without Russian gas. Russia’s recent setbacks on the battlefield, and the diplomatic pressure on President Vladimir Putin evident in exchanges last week with Xi Jinping and Narendra Modi, have allayed fears about the extent of Moscow’s influence in energy markets.
