The market has started September with some concerns. Read here which of them are the most important for investors.
September 6, 2021, | AtoZ Markets-In many countries, the summer is coming to an end. As the month begins, some events could shake the world’s financial markets, and in this article, we will tell you which ones could affect your trading.
In most countries, the debate is now about whether to maintain or modify the contingency plans that were created to solve the financial problems of the pandemic.
During this month, some G20 banks will have to talk about tapering. Also, political and economic events may affect markets.
See below our list of globally important events that will mark the destiny of the markets in September:
In the financial context, tapering is understood as the withdrawal of liquidity injections by central banks into their economies.
We can then say that it is the reduction in the purchase of public debt bonds in an economy, but in a staggered manner to avoid a very negative effect at the financial level.
In finance, tapering refers to the gradual reduction of extraordinary expansionary monetary policy measures taken by central banks after an economic crisis.
Given the enormous magnitude of the global fiscal stimulus, the process is to be gradual to avoid a rebound effect.
As a curious fact, the word tapering was first used by Ben Bernanke on May 22, 2013. On that day, a panic ensued, resulting in severe stock market declines and increases in bond yields.
There is currently speculation that the Fed may announce the dates for the start of tapering at its September meeting. Fed’s Chief, Jerome Powell, has mentioned several times that tapering and rate hikes will be conducted separately.
Fed funds futures are pricing the first rate hike for early 2023. Likewise, 90% of economists polled by Reuters expect Powell’s term to be extended.
The United States Needs to Expand Its Debt Limit
The U.S. Treasury technically reached its $28 trillion debt limit a month ago. However, to avoid a government shutdown or, worse, a technical default, Congress must raise or suspend that limit this month.
Janet Yellen has been calling for several days for this to take effect as soon as possible. This situation has happened before in the world’s leading economy. In 2011, disputes over the debt ceiling led S&P Global to cut the U.S. credit rating.
Although there are no signs that bond markets are pricing at the risk of default, this could change in the coming days. This would generate strong volatility in the world’s financial markets.
Political Elections in Some Countries
In some of the world’s major economies, political elections will be held in September.
Canadian Prime Minister, Justin Trudeau, faces a major political challenge. He hopes that his handling of the pandemic, and the heavy rollout of vaccines, will provide him with a majority at the polls. However, polls show his Liberals in a statistical tie with Erin O’Toole’s Conservatives.
Likewise, Germany will have a change of political leader and Europe’s main economy prepares for surprises.
The longest-serving leader in Western Europe, Angela Merkel, will step down as German Chancellor after 16 years in office and four consecutive electoral victories.
The choice presents a wider range of possibilities than usual. The center-left Social Democratic party leads opinion polls, beating Merkel’s conservatives for the first time in 15 years.
Financial markets are now wondering what this new type of government means for European fiscal policy.
In the same order, internal elections will be held in Japan on September 14. The internal elections in the Liberal Democratic Party (LDP) are to appoint the successor to Prime Minister Shinzo Abe. He announced was stepping down for health reasons.
Unlike in Europe, Abe’s collaborator, Yoshihide Suga, is the strong favorite to win. Suga, who is 71 years old, and is the current secretary-general of the government, has already announced his candidacy, and it seems that his victory will be a given.
As we can see, September will be a month with many surprises. The world’s financial markets are already preparing for big changes.