 Okay, very good morning. It is Wednesday 22nd of September and of course we get the FMC meeting later on today I will be covering that live on the YouTube channel And so don't forget if you're not already done so to subscribe to the channel hit the bell icon And you'll get a notification as soon as we go live I'll be kicking that off at around 15 minutes before the initial Fed statement So 645 London time for the statement at 7 and then we'll cover the press conference with drone power as well at 730 so hopefully you can join me But otherwise in terms of the briefing this morning There's a little bit of a relief seen overnight in the Asia pack region on the back of some latest news in regards to evergrande To make a domestic bond coupon payment So alleviating at least short-term some of those fears that have really been Shackling market sentiment of late and also the PBOC did a sizeable liquidity injection overnight Which we'll discuss in a moment Otherwise got an update on the BOJ meeting that also took place overnight Some movement on the US debt ceiling from the house as well late yesterday Talk about Jane Jane vaccines and then we'll have a look at the day ahead If there's anything else to be aware of outside of the Fed so to kick things off as we always do Let's have a look at the charts this morning And as you can see here, I'll take the S&P 500 and it as an example Yesterday pretty seesaw price action It did look a little bit precarious and whether or not we'll get a repeat of that Monday set off but that didn't materialize at the close the S&P and now we're relatively flat to very marginal losses Of just one tenth of a percent and as that actually finished up about two tenths of one percent But looking at the overnight session, you can see here quite a noticeable pop in futures prices And this came after those reports that I've just suggested about China ever ground. So what was said Was here so a couple of things the company's onshore property unit The name of that is called the Hengda real estate or Hengda real estate They said overnight that it has negotiated a plan with bondholders to pay interest due on its 5.8% 2025 domestic notes and remember it was the fears over the lack of payment of these notes or at least restructuring To able to deal with them that was creating fears of this default and systemic risk to the banking system in China And beyond banking I should say And so that was definitely a key headline that came out overnight It came out shortly after 2 a.m And hence the reason why going to the European Open the markets generally showing a positive footing in equity space elsewhere We're pretty flat with flat in the Dixie more broadly speaking pretty much unchanged in Gold and also tea notes as well this morning But oil's getting a bit of a light reprieve as well from the situation is trading up around a dollar and twelve cents Just about a seventy one fifty mark at the moment But we also had some infantry data last night that I'll make you aware of as well So the other thing is beyond this headline you had China come out and They basically have said that they've pumped a hundred and twenty billion Yuan that equates to around 18.6 billion US Dollars into the banking system through reverse repurchase agreements resulting in a net injection of 90 billion Yuan Overnight and the action there from the central bank Domestically aimed at just soothing nerves as the market continues to worry So as such providing additional short-term liquidity to the system a couple of other things to be aware of For one I guess understanding of what the next steps could be is quite key and listening to big bank commentary can be quite helpful in that regard and analysts at Morgan Stanley have said that Beijing may initiate a managed debt restructuring of the troubled property lender in the coming week followed by policy easing is what their economists are Anticipating in China in October to contain the spillover perhaps into the broader economy The other thing as well that I guess is a question right now is just given how large evergrande is I did see a couple of tweets yesterday of infographics of all the different units and it was just mind-boggling how How big this company is and how far reaching a potential default could reverberate across the globe not just in China and so a key question here are there any Western US based financial firms that could face exposure on any further complications at Evergrande and There's a report Bloomberg have released this morning talking about city group. Apparently has no direct lending exposure to Evergrande As according to the spokeswoman JP Morgan and Bank of America also have no such links according to people Familiar with the matter as cited by Bloomberg sources And so again the combination really of three things and so I'd say first and foremost the idea that For their major property unit in real estate that they've negotiated to plan with bondholders is very important You've then also got the net liquidity injection from the central bank and then a smaller third point as well It's becoming more apparent that there isn't this kind of more broader systemic risk that could Spread out into North American financial institutions as well. So a couple of those positive points I wouldn't say the markets in outright just run away positivity right now But it certainly has put a bit of a flaw on that negative developments that we're seeing at the beginning of the week Okay, elsewhere. We had the BOJ meeting overnight pretty boring if I'm being honest It kept its negative interest rate asset buying targets unchanged all very much is expected The bank trimmed its view of exports and production to reflect the hit to supply chains that we've seen from the continuous Kind of dealing with the Delta variant and covert outbreak that's been impactful in in Japan over the recent weeks and they kept their overall view on the economy then unchanged There the decision of course comes as well a week before the ruling party election to pick the new PM Suga's Successor so definitely on the political side We're going to be looking out for more information from that next week But again, not really too much to mention here on the BOJ. The other thing then it's US debt ceiling So amongst all the other things that Biden is trying to deal with at the moment This is another one that's on the near-term horizon that definitely will probably become much more of a talking point But to get you up to speed last night the Democratic controlled house passed a bill a bill that would suspend the US debt ceiling into December 2022 and provide the government funding to operate past the 30th of September However, Republicans are vowed to block it when it reaches the Senate over the debt limit provision now important thing to be aware of here is One alternative and this will probably help just make sense of that all of this would be to strip the debt ceiling Provision from the funding bill in order for it to avoid a government shutdown October 1st Democrats could then use the fast-track budget process to pass a debt ceiling increase without the Republican support So again, it's in the Democrats interest though to try and bolt on the debt ceiling provision Into the then the government funding bill. This is that really big one that's being hotly contested Not only by Republicans across the floor But also by people like mansion and so on other Democrats as well And so by unconnecting the two their house or the Democrats in a sense could probably deal with this debt situation But they're trying to force the risk of that shutdown in order to then push it through with a Sizable fiscal spending plan that they're after in the end a lot of this as always with politics is posturing There's a cliff edge, right? These politicians love walking up and peering over the edge of the cliff Threatening each other of what they're going to do It could well even be tantamount to a short brief period of a government shutdown We've seen this many times before but in the end deals are always done And so yeah, I think that's why the markets fairly sanguine about the whole idea of a government shutdown at this point But certainly it's something that you're going to hear a lot more about in the period ahead The debt-sitting suspension is obviously urgently needed though from the point of view of the Treasury Department They've warned they could run out of accounting measures to starve off a payment default sometime in October And the whole reason why this has come back to the forefront Of course is that the debt limit came back into an effect Last month in August after a two-year suspension, but given the likes of the US Treasury They're always going to sound like that they're kind of that's part of the posturing and optics to leverage then the side of the The democratic view at the moment to get that tied into the spending bill. So again long story short It's a talking point. It's going to become more. So is it that important? Yes, there are some risks around it in the end though I think it will be a non-issue personally is what I see at this point vaccines Yeah, very briefly Johnson and Johnson came out yesterday and said a second shot of its COVID-19 vaccine Given about two months after the first increased its effectiveness to 94% in the US against moderate to severe forms of the disease So by any stretch particularly high numbers and of course, this was a single shot Originally and so a second shot keeping that up and somewhere like the US Which is obviously critical not just for that economy But the global economy is heavily as well using that particular vaccine in terms of its rollout strategy So yeah quite quite a positive there to some respect in terms of the day ahead The actual calendar is really quiet for the UK European morning So it would not be a surprise to see fairly conservative trade Perhaps barring anything unexpected fairly respecting of technical near-term levels of relevance Perhaps range-bound trade because really it's until we get into the US session Even then there's no major 130s. We do have the US existing home sales at three. We've got the DOE Oil infantry numbers at 330 just briefly We did have a bullish headline last night in the API is a drawdown of 6.1 million There's almost double of what analysts were anticipating also draw across the board Cushing was a draw of 1.7 for 8 million as well And as I said WTI is on the front foot. It's got its eyes on 72 at the moment on the upside Which would be a bound with a near-term point of resistance from Friday's trading levels The big thing then of course is the FMC And as I said, I will be covering this live later So I'm not going to go into too much of greater detail right here right now But a few things to be aware of the September meeting obviously widely anticipated Since the central bank is expected to signal it's getting ever closer to tapering its bond purchase program again This isn't about yes, we're doing it It's about laying hints to then really looking to commence this thing later on in the year November December time is what most analysts are expecting This will be then the first big step away for policies put in place to counter at obviously the pandemic And so hence the reason why markets are so sensitive to this upcoming meeting this evening To quote and one of the banks Bank of America's US short-rate strategy team a couple of things They said that I think quite interesting They said power will probably do his best to distinguish and I think important Decouple the association of tapering and rate hikes again What they're trying to explain there is that there's a sequence to how policy Normalization occurs and so you taper you then start to taper down over a prolonged period of time so in this case several months where you reduce then the size of your monthly bond purchases and Then you have a period typically if we go put on historical precedence of no action But rates remain low as they are at the moment And then thereafter rates start to gradually increase and obviously the first rate hike key the timing of that Because then typically it's a sequence in the cycle of rate hikes going forward And so what Powell will be very conscious of doing is is trying to Decouple the two because what he won't want people to think is just because we're tapering we're hiking rates That's not what he would want to convey So he's going to try and potentially hedge himself in communication Tactics by saying yes things have got positive enough We are going to taper he needs to drop now more definitive hints if they are going to start at the end of the year Which is policy tightening, but he also doesn't want that to become a point of which their market starts get spooked by Accelerated overall policy tightening by hedging himself by using perhaps the outlook to soften the blow that look rates aren't going to rise Particularly soon and with that being said then given the recent data might give validation for that So they might mark down their growth estimates for the year. Obviously, we're going to get the projections as well going forward The key thing of course is going to be on the dot plots Probably and arguably other than just probably the first snap headline that we see on how he describes the tapering situation is going to be The number of dots for lift off in 2022 or 2023 As a reminder seven of 18 officials in June the last time we got these projection projections penciled in the lift off in 2022 though the median estimates or rates on hold into 2023 To give you a guide more than a third of economists surveyed think the median for 2023 could increase From two rate hikes and you remember that was the surprise at the time because people were anticipating one It came out as two that might well go higher again An indication that the first rate hike then could well occur in the first half of the year if there was going to be three conducted for example The forecast will also include the first year of 2024 because remember with the way it rotates now will bring in that year of where rates would be on that period Where three additional hikes are expected by that time? So again, I'm going to go through all of this in more detail. Obviously, I'll talk about potential scenarios probabilities Subsequent market reactions. I'll do that live When we come on at 645 later on this evening, but that is it gonna leave it there Any questions at all? Of course, feel free to drop me a comment if you need my morning notes So my Twitter account as ever and so have a good day, and I'll catch you online later on. All right. Take care