CHINA PROPERTY FEARS

Grow­ing investor angst about China’s real estate crack­down rip­pled through mar­kets on Mon­day, adding pres­sure on Xi Jinping’s gov­ern­ment to pre­vent finan­cial con­ta­gion from desta­bi­liz­ing the world’s sec­ond-largest economy.

Hong Kong real estate giants includ­ing Hen­der­son Land Devel­op­ment Co. suf­fered the biggest sell­off in more than a year as traders spec­u­lat­ed Chi­na will extend its prop­er­ty clam­p­down to the finan­cial hub. Inten­si­fy­ing con­cerns about Chi­na Ever­grande Group’s debt cri­sis dragged down every­thing from bank stocks to Ping An Insur­ance Group Co. and high-yield dol­lar bonds. One lit­tle-known Chi­nese prop­er­ty devel­op­er plunged 87% before shares were halted.

GLOBAL MARKETS JOLTED

A big week for glob­al mar­kets is off to a messy start as stocks plunge around the world and haven bids break out. Blame every­thing from Chi­na Ever­grande Group’s woes and the col­lapse in iron-ore prices to fears over the U.S. debt ceiling.

The endgame for cred­i­tors to the Chi­nese prop­er­ty giant has arrived just as traders are in a state of alert before the Fed­er­al Reserve’s meet­ing this week.

The Stoxx Europe 600 index dropped 1.9% Mon­day, on track for the biggest decline in two months, as futures on the S&P 500 test key 50-day sup­port levels.

Gridlock, debt-ceiling showdown weigh on market…

The U.S. stock mar­ket is on track to post its worst day in months. And U.S. pol­i­tics are in part to blame.

As the Dow Jones Indus­tri­al Aver­age fell 614 points on Mon­day — its worst day since July — and the S&P 500 shed­ding 1.7%, strate­gists say grid­lock on Capi­tol Hill is start­ing to send shut­ters through the market.

The S&P 500 on Mon­day notched its worst ses­sion since May.

Earnings Alarm Bells Ringing; Signs of Fatigue…

An alarm­ing num­ber of com­pa­nies have warned that prof­its won’t meet expec­ta­tions when they report in a month.

The group, includ­ing PP Indus­tries Inc. and Sher­win-Williams Co., are pri­mar­i­ly mate­ri­als pro­duc­ers that have strug­gled amid sup­ply-chain dis­rup­tions. While just a small part of the S&P 500, their earn­ings have his­tor­i­cal­ly been the most cor­re­lat­ed to the index’s of all sec­tors, a study by Bank of Amer­i­ca Corp. found.

Junk-Debt Sales Soar Toward Record…

The $3 tril­lion mar­ket for low-rat­ed com­pa­nies’ debt is hav­ing its best year ever, pow­ered by a rebound­ing econ­o­my and investors’ demand for any extra yield.

U.S. com­pa­nies includ­ing Crocs Inc. and Sea­World Enter­tain­ment Inc. have sold more than $786 bil­lion of junk-rat­ed bonds and loans so far in 2021, accord­ing to S&P Glob­al Mar­ket Intelligence’s S&P. That tops the pre­vi­ous high for a full year in data going back to 2008.

Surging Fertilizer Costs Risk Making Food Even MORE Expensive…

Most peo­ple don’t give fer­til­iz­er a sec­ond thought — except maybe when dri­ving through a par­tic­u­lar­ly fra­grant agri­cul­tur­al area. But with prices for some syn­thet­ic nutri­ents at their high­est lev­els since the finan­cial cri­sis, it could mean weak­er har­vests and big­ger gro­cery bills next year, just as the world’s sup­ply chains start to recov­er from the pandemic.

A per­fect storm of events — from extreme weath­er and plant shut­downs to new gov­ern­ment sanc­tions — has hit the chem­i­cal fer­til­iz­er mar­ket this year, slam­ming farm­ers already buck­ling under the strain of ris­ing costs to pro­duce food. 

“What On Earth Is Going On In Commodities?”- Morgan Stanley Explains

As the world embarks on its jour­ney towards ‘net zero’, a few impli­ca­tions seem straight­for­ward: coal should be over­sup­plied, nat­ur­al gas should stay abun­dant and the mar­gin­al cost of elec­tric­i­ty should approach zero as renew­ables take over. In the full­ness of time, these propo­si­tions may well turn out to be cor­rect, but the road between here and ‘net zero’ seems to have a few unex­pect­ed twists and turns.

Take the cur­rent sit­u­a­tion: glob­al coal con­sump­tion peaked back in 2013, yet the price of ther­mal coal is cur­rent­ly close to its all-time high, hav­ing more than dou­bled in the last few months to ~US$180/tonne. The same has hap­pened to liq­ue­fied nat­ur­al gas (LNG), which has ral­lied from ~US$7 to ~US$20/mmbtu over the last few months – also an all-time high. Euro­pean nat­ur­al gas prices have risen in tan­dem, which in turn has dri­ven a sharp spike in elec­tric­i­ty prices: day-ahead prices across con­ti­nen­tal Europe have gone from ~€50 to ~€150/MWh – you guessed it, an all-time high. As a knock-on effect, alu­minum prices have soared, from US$2,000/tonne at the start of the year to US$2,900/tonne today.

This is unusu­al, espe­cial­ly because the glob­al econ­o­my has yet to recov­ery ful­ly from the COVID-19 cri­sis. So what is going on? A com­mon set of fac­tors ties these ral­lies togeth­er. As often hap­pens, the sto­ry starts in China.

The com­bi­na­tion of a post-COVID-19 recov­ery and unusu­al­ly hot weath­er has increased con­sump­tion of elec­tric­i­ty sharply this year. Most of China’s elec­tric­i­ty is pro­duced from coal, but domes­tic coal pro­duc­tion is increas­ing­ly strug­gling to keep up – the result of reg­u­la­to­ry reforms, under-invest­ment and more strin­gent HSE inspec­tions. Anoth­er impor­tant source of elec­tric­i­ty gen­er­a­tion in Chi­na is hydropow­er, but because of droughts in key parts of the coun­try, hydropow­er has failed to grow this year too.

STOCKS TURN SOUR: Slow motion deterioration with pockets of shares down 20% or more…

The land mines for the mar­ket are grow­ing. Sea­son­al weak­ness is com­bin­ing with uncer­tain­ty over the Covid-19 delta variant’s impact on con­sumer behav­ior, ris­ing labor and mate­r­i­al costs push­ing prices high­er as well as poor eco­nom­ic data out of China.

While the S&P 500 is still about 1% from its record high, those land mines are tak­ing their toll on large sec­tors of the market.

“For the last sev­er­al months, most stocks have declined more fre­quent­ly than they have advanced–evidence of a weak­en­ing mar­ket con­di­tion,” CFRA chief invest­ment strate­gist Sam Sto­vall said in a recent note to clients.

2nd Largest Real Estate Developer defaults…

Protests inten­si­fy at Chi­na Ever­grande Group offices across the coun­try as the devel­op­er falls fur­ther behind on promis­es to more than 70,000 investors. Con­struc­tion of unfin­ished prop­er­ties with enough floor space to cov­er three-fourths of Man­hat­tan grinds to a halt, leav­ing more than a mil­lion home­buy­ers in limbo.

Fire sales pum­mel an already shaky real estate mar­ket, squeez­ing oth­er devel­op­ers and rip­pling through a sup­ply chain that accounts for more than a quar­ter of Chi­nese eco­nom­ic out­put. Covid-weary con­sumers retrench even fur­ther, and the risk of pop­u­lar dis­con­tent ris­es dur­ing a polit­i­cal­ly sen­si­tive tran­si­tion peri­od for Pres­i­dent Xi Jin­ping. Cred­it-mar­ket stress spreads from low­er-rat­ed prop­er­ty com­pa­nies to stronger peers and banks. Glob­al investors who bought $527 bil­lion of Chi­nese stocks and bonds in the 15 months through June begin to sell.

While it’s impos­si­ble to know for sure what would hap­pen if Bei­jing allows Evergrande’s down­ward spi­ral to con­tin­ue unabat­ed, Chi­na watch­ers are gam­ing out worst-case sce­nar­ios as they con­tem­plate how much pain the Com­mu­nist Par­ty is will­ing to tol­er­ate. Pres­sure to inter­vene is grow­ing as signs of finan­cial con­ta­gion increase.

Jay‑Z NFT Feud Spotlights Legal Peril in Hot Investment Trend…

As a young rap­per, Jay‑Z once teamed up with Damon Dash to sell CDs of his music out of a car in the Brook­lyn projects. Today, the co-founders of Roc-A-Fel­la Records are embroiled in a legal fight involv­ing one of the most cut­ting-edge invest­ments: non-fun­gi­ble tokens. 

The law­suit is among a flur­ry involv­ing NFTs as U.S. courts begin to grap­ple with the nov­el legal issues sur­round­ing own­er­ship and reg­u­la­tion of the assets, which have recent­ly explod­ed in val­ue. More than half a dozen suits cit­ing NFTs have been filed in fed­er­al courts alone since the start of 2020, as month­ly trad­ing vol­ume in the world’s biggest NFT mar­ket­place, OpenSea, soared from $8 mil­lion six months ago to more than $1 bil­lion in August.

The dis­pute began in June, when Roc-A-Fel­la sued Dash, seek­ing to stop him from auc­tion­ing off the copy­right to Jay‑Z’s debut album, Rea­son­able Doubt, as an NFT, which rep­re­sents own­er­ship of a dig­i­tal object on a blockchain. Roc-A-Fel­la says that while Dash holds a one-third stake in the com­pa­ny, it owns the album itself, and he has no legal right to sell the NFT. 

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