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Shimao

• Shimao saga is an unsettling warning for China’s property market.
•  Shimao, a Chinese developer, defaulted on a $645 million loan earlier today It’s not the most well-known name in the industry, but that’s precisely the goal. 
• While Evergrande and Kaisa have received a lot of attention recently, what is going on with Shimao may be even more alarming. The company has long been regarded as one of the industry’s healthiest competitors, but the fact that it is experiencing payment troubles illustrates the concept that no company is immune to the current struggles in China’s property market.
• Evergrande is well-known for its high leverage, but if higher-quality enterprises begin to exhibit indications of stress, it might be a warning sign for China’s real estate market. The danger here is that it will spread to other better-quality assets, causing a big knock to global trust in Chinese markets as well. • It is never a good indication in markets when people start talking about the less flashy names and start bringing up issues that should be “functioning as it should.” Keep an eye on this.

Saxony 

Saxony December CPI +5.1 percent vs +5.0 percent y/y before This just confirms that the national figure will likely be higher than 5.0 percent year on year, with the forecast matching the November reading of +5.2 percent year on year. This will only increase the pressure on ECB officials if inflationary pressures remain strong as the year comes to a close.

European equities

European markets dragged down by Fed-induced selloff. 

European stocks are in the red to begin the day. 

Eurostoxx -1.2 percent, Germany’s DAX fell by 1.0 percent, France’s CAC 40 fell by 1.3 percent, the United Kingdom’s FTSE fell by 0.9 percent and Spain’s IBEX fell by 1.3 percent. 

So far today, the more pessimistic atmosphere has kept the dollar and yen stronger in the forex market. As risk sentiment stays on the defensive, the USD/JPY has been pulled to new session lows of 115.75. Despite the fact that 10-year Treasury rates have risen 3 basis points to 1.733 percent. 

If nothing else, it may be difficult to see sentiment entirely flip around before the publication of the NFP tomorrow.

There might be scope for some pause in the selloff in Wall Street later but expect overall risk tones to stay more cautious as the week winds down.

Dollar 

• The dollar rises on the day. 
• The Fed’s hawkish tone from yesterday is helping to keep risk assets under control, and the dollar is extending gains versus commodity currencies for the most part today. The AUD/USD is down 0.9 percent to 0.7157, with the market aiming towards 0.7100 next. 
• Meanwhile, EUR/USD has fallen to a day low of 1.1285 and GBP/USD has fallen further to 1.3505 after failing to break through resistance from the 100-day moving average and 61.8 retracement level. 
• Despite the dollar’s surge, shares are recouping some of their earlier losses. The S&P 500 and Dow futures are presently flat, but it is too early to predict that dip buyers will triumph.
• Risk trades remain under pressure, especially if bond rates threaten to rise. For the time being, 10-year Treasury rates are up 2.2 basis points to 1.725 percent but face resistance from 1.75 percent to 1.79 percent, as previously said.