Marketmind: When the Dragon sneezes, Europe catches a cold

September 16 – A look at the day ahead from Danilo Masoni.

As pressure mounts on China’s tech and real estate moguls and its economic growth falters, markets around the world are starting to worry. But it’s Europe, with its export-oriented economy and supercharged luxury stocks reliant on affluent Asian buyers, that is likely to feel the most pain.

The STOXX 600 Index (.STOXX) has fallen 1% so far in September, twice as much as global equities (.MIWO00000PUS), and although Europe is broadly still in favor of investors and analysts of research, the index slipped to July lows.

Wall Street’s strength overnight could trigger a rebound of relief this morning, but China’s woes are far from over.

The deepening crisis at China’s No.2 real estate developer Evergrande sent stocks to a decade low, pushing Asian stock markets into their fourth day of losses. Trading in Evergrande bonds has been suspended. And virus outbreaks cloud travel plans at next week’s Mid-Autumn Festival.

Europe Inc is also facing internal problems. Soaring electricity prices prompted Spain to cap its energy bills and Italy announced Thursday that it was planning “short-term measures” to offset rising prices. Concerns are that other governments could resort to similar measures – to the detriment of utility companies.

There is some market support thanks to signs that US inflation has peaked and the world’s largest economy is in good shape. Retail sales will be researched later for more clues about the health of the world’s largest economy.

Key developments that should give more direction to the markets on Thursday:

Strong Japanese Export Growth Cools As COVID-19 Hits Supply Chains Read More

Philip Morris concludes an agreement to purchase British Vectura with 75% of the shares offered read more; The French electricity company Veolia launches a capital increase of 2.5 billion euros[nL1N2QI0D1;VivendiouvrelavoieaurachatdeLagardère[nL1N2QI0D1;VivendipaveswayforLagarderetakeover[nL1N2QI0D1 ;VivendiouvrelavoieaurachatdeLagardère[nL1N2QI0D1;VivendipaveswayforLagarderetakeover

German car registrations August

ECB speakers: Christine Lagarde

Norges Bank Governor Oystein Olsen speaks

Egyptian central bank meeting

US weekly jobless claims / Philly Fed September

US Retail Sales / Business Inventories

Reporting by Danilo Masoni; edited by Sujata Rao

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