Once a titan, Evergrande lost its battle against time and fell from grace, threatening not just domestic stability but also foreign investor confidence in China's markets. While legal tangles delay liquidation, the fate of $300 billion in debt and hundreds of thousands of homebuyers' deposits hangs where property is the main investment for ordinary citizens. Beijing's measured response suggests limited contagion risk, although the insolvency process is crucial to retaining future foreign investment.
EQUITY
Wall Street marched on strong at the week's opening, creating new highs even in a high-interest environment that is expecting cuts by March. Microsoft's earnings, which are used to gauge investor sentiment towards AI stocks, show slowing growth, while investors are eyeing the Fed meeting and US employment data that will set the market's trajectory for months to come.
GOLD
Gold prices remained steady as traders awaited the Fed's decision on policy rates and Chair Jerome Powell's remarks, besides any clues beforehand. Geopolitical tensions in the Middle East may cause a slight positive shift in gold prices, while expectations of lower interest rates in the U.S. and a weakened dollar index further support the precious metal's appeal. Price action stands bullish on its engulfing breakout on the trendline.
OIL
Although crude oil's recent rally gave hope for energy, it succumbed to uncertainty in China's economy after a Hong Kong court ordered the liquidation of Evergrande, casting a shadow over the world's top oil consumer. A deadly drone attack on a US base in Jordan and Russian oil facilities offers little support for consumption as supply is abundant from countries refilling their war chests, which utilise more drones than tanks.
CURRENCY
The dollar is muted ahead of the Fed meeting on Wednesday. While rates are expected to remain the same, the March and May cut odds seem 50/50. This cautious vibe kept other major currencies muted too, although the yuan gained slightly overnight after a dip in U.S. Treasury yields, while Chinese stimulus capped its rise.
