By Geoffrey Smith
Investing.com – US President Joe Biden again warns China that US forces would defend Taiwan in the event of an “unprecedented attack.” The UK shuts down its markets to bid farewell to Queen Elizabeth II. Cryptocurrencies collapse as investors lack the stomach for a week of aggressive central bank action, and Volkswagen values its Porsche unit at up to $75 billion. Here’s what you need to know about the financial markets on Monday, September 19th.
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 seemed to leave no room for misunderstanding and, when pressed, gave the same answer twice. However, the White House again felt the need to issue a separate statement later, reiterating that this was Biden’s personal view and not official US policy.
Historically, the US has avoided taking a stand on the issue while supporting Taiwan in every other way.
The question of how far the US would risk war with the People’s Republic of China has become increasingly pressing this year, as Beijing has ramped up its rhetoric about “reunification” with Taiwan, while the US has simultaneously offered significant military aid to Ukraine to get it to help defend against Russian attacks.
2. Crypto slumps ahead of central bank meetings
fell to its lowest level in three months at the start of a week expected to tighten significantly in global monetary policy.
The cryptocurrency’s momentum has waned since last week’s U.S. August led to speculation that the Federal Reserve could raise its key by 100 basis points later this week, rather than the 75 basis point consensus. Further large hikes are also expected from Sweden, Norway, Switzerland and the Bank of England.
Sentiment was not helped by the failure of Ethereum’s long-awaited “merger,” which led to an immediate pickup 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 that will extend losses at open; VW sets Porsche rating range
US stock markets are expected to open under the same cloud of depressed risk appetite, continuing last week’s declines.
By 06:20 ET (10:20 GMT), they were down 301 points, or 1.0%, while down by the same amount and 1.1%. The three benchmark cash indexes were down 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 expected to report earnings. Also in focus are Volkswagen AG (OTC:) ADRs after the company announced the price range for the IPO of its Porsche division. With the spin-off, VW is aiming for a valuation of up to EUR 75 billion.
The monthly housing market report is the only notable item on the data calendar.
4. Britain buries Queen Elizabeth II
World leaders came to London for the funeral of Queen Elizabeth II. UK markets closed for the day, dampening trading across most of Europe.
However, trading resumed, shedding 0.4% to $1.1366, testing the 37-year low set on Friday after dismal August data.
The data pushed market participants in the direction they expected the Bank of England to hike 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 of fiscal policy under the new government of Prime Minister Liz Truss.
5. Oil slip on demand concerns
Crude oil prices slipped further below $100 amid concerns over the state of the global economy, with further weakness expected in China despite the lifting of Covid-19 restrictions in the mega-city of Chengdu late last week.
As of 06:30 ET, futures were down 1.9% to $83.10 a barrel, while down 1.9% to $87.91 a barrel, testing a seven-month low. Even a report saying that OPEC and its allies missed their monthly production target by more than 3.5 million barrels last month found little support.
Prices also continued to fall as traders became more optimistic about Europe’s chances of surviving the winter without Russian gas. Russia’s recent battlefield setbacks and diplomatic pressures on President Vladimir Putin, evident in exchanges with Xi Jinping and Narendra Modi last week, have calmed fears about the extent of Moscow’s grip on energy markets.