Weekly Summary: Evergrande “Bought” Relief of Default

The major news this Friday is the postponement of the default of Evergrande, the third largest developer in China. The company has found the money - $83.5 million - to finance its offshore bond payments. Investors may respire. But not for long as next week, on October 27, Everagrande has to find more money to service its debt, but much less than the required amount needed for the payment to be made by October 23.

But now Asian stock indices are rising – the Hang Seng edged higher by 0.27%, Japanese Nikkei 225 gained 0.53% and European stocks are up in average by 0.2-0.4%. So we could expect that Friday’s thriller was likely not staged. The U.S. trading session is likely to follow the positive note set in Asia this morning.

Investors may finally turn to macroeconomic data. Japan and Australia have recorded a business activity growth in October, while Europe has slowed down their PMI’s. The decisive data, however, would be released in the United States later on Friday. Forecasts are mixed so far. Stocks would likely close this day moderately up.

The S&P 500 broad market index rose above important resistance zone of 4520-4530 points. If no scale backs occur, the next target for the index would be at new all-time highs at 4620-4630 points.

The crude market is locked as crude prices are squeezed by the OPEC+ decisions to continue with gradual crude output rise and investors’ intentions are  to renew 2018 highs at $86.80 per barrel of Brent crude benchmark. On the other hand, slowing down global economy pressure crude prices may prevent them from going further up. GDP figures for China that were released this week showed a slowing down. GDP of the United States, that is going to be released next week, is forecasted at 3.2% up in the third quarter, which is lower than 6.7% in the second quarter of 2021. In this situation crude prices may continue sideways within the range of $83.0-86.0 per barrel Brent.

Gold prices are experiencing high volatility in the wide trading range of $1750-1800 per ounce. Prices are now close to the upper margin of this range while U.S. 10-year Treasuries yields are also up to 1.69%. Nevertheless, the mid-term target for gold prices at $1600 per ounce remains intact.

The Greenback lost its steam as EURUSD had ineffectively tried to crack the resistance at 1.16500 on several occasions. The breakthrough of this resistance would activate the upside scenario with possible targets at 1.17400 and 1.18100. But it hasn’t happened so far. So we have a downward movement to the 1.15500 as a primary scenario.

GBPUSD is “flirting” with the resistance at 1.38000 in the same way as the EURUSD. But it could not break this resistance, so a scaling back to 1.36500-1.37000 is a likely scenario for now.