Bulls Broke, and 3 Days Left before the Default of Evergrande

20 окт. 2021 г.

The US stock market ended with growth for the fifth day in a row. Judging by the SP500 index, its further fate should be decided if not today, then tomorrow. A move above 4500 will be an unconditional victory for the bulls and will pave the way for further growth.

As for the reasons for growth, analysts can think of nothing better than a successful reporting season as a justification. To be fair, we note that so far the reporting season is really good, as confirmed yesterday's reports from Procter & Gamble, Johnson & Johnson, Philip Morris International and Netflix.

Although it is worth noting that while exceeding forecasts for profits and incomes, companies in the real sector (in particular Procter & Gamble) expressed concern about rising costs and inflation. But they solved the problem of rising costs for themselves simply - they raised prices for products. From the outside, it looks like an elegant way out of a difficult situation, but, in fact, the problem was simply passed on to consumers and it went nowhere.

How the problems of Chinese developers have not disappeared. Another default this week: Sinic, registered in Hong Kong, defaulted on $ 246 million bonds. Plus S&P and Moody's downgraded credit ratings for a number of other developers. Well, and the cherry on top, of course, is Evergrande: already this Saturday, the 30-day period will expire, which has been given to the company to pay off the debt since the first default. That is, the official date of default, the point of no return, may be just October 23 of this year.

But once again, we note that here and now the markets are not much interested in problems such as defaults by developers in China, inflation and changes in the vectors of monetary policies, the energy crisis, or, for example, weak data on the US real estate market, published yesterday. It is much more interesting, for example, to buy cryptocurrencies, since yesterday the first ETF on Bitcoin futures was launched.

What can turn the tide? In addition to Evergrande on Saturday, already today we are waiting for inflation statistics from the UK, Eurozone and Canada, which may remind the markets of Central Banks and the end of the era of cheap money, without which this whole feast would have been impossible.