- The Federal Reserve signaled it could begin tapering its monthly asset purchases of $120 billion in November
- Existing-home sales declined 2% in August, while new homes sales rose 1.5%
- China Evergrande Group has almost 800 projects in more than 200 Chinese cities
Top Three Market Headlines
Fed Signals Tapering Could Begin in November: The Federal Reserve signaled last week that it could soon start reversing the extraordinary monetary stimulus measures it imposed in the wake of the Covid-19 pandemic. For one, the Fed stated it could begin gradually tapering its monthly asset purchases of $120 billion as soon as November and wrap up the process in mid-2022. Chairman Jerome Powell cited as support the on-going improvement in the employment market. In addition, Fed governors updated their interest rate expectations, and half of the 18 officials now expect to raise the federal funds rate by the end of 2022, up from seven officials in June.
U.S. Housing Market Sends Mixed Signals: Sales of existing homes cooled slightly in August as elevated asking prices have pushed away potential buyers. The National Association of Realtors (NAR) reported last week that existing home sales dropped 2% in August compared to July, the biggest monthly decline since April. The median sales price in August was $356,700, an increase of almost 15% over the prior year. At the same time, the U.S. Census Bureau reported that sales of new homes rose 1.5% over the month to a seasonally adjusted annual pace of 740,000, the highest number in four months.
Large Chinese Property Developer Risks Default: Chinese property developer and home builder China Evergrande Group, one of the largest developers in the world, rattled markets last week with indications it may soon default on some of its $300 billion of debt. Pressured by declining property sales and tightened borrowing restrictions, Evergrande missed an $83.5 million interest payment due last week on some of its dollar-denominated bonds. The development spurred much speculation among investors about Evergrande's future, possible contagion effects on the Chinese economy and global markets should the company fail, and whether and to what extent the Chinese government may take steps to mitigate some investors' losses should that happen.