FirstFT: Fed warns of risks posed by Chinese real estate

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The Federal Reserve yesterday warned that tensions in China’s real estate sector “pose a risk to the US financial system”, pointing to heavily indebted real estate companies such as Evergrande as a potential source of global contagion.

In its biannual financial stability report, the US central bank said it was worried about China because “the country’s corporate and local government debt remains high; the indebtedness of the financial sector is high, especially in small and medium-sized banks; and real estate valuations are strained ”.

He pointed to Evergrande Group, the heavily indebted Chinese real estate company, as a source of concern and said there was a risk that the contagion could spread beyond the country’s real estate sector.

But speaking at a press conference, Fed Chairman Jay Powell said he didn’t see much “direct exposure in the United States,” although he expressed concern about the fact that the unrest could have a wider effect on global financial conditions and investor confidence.

The Financial Times reports today that global holdings of Chinese stocks and bonds have jumped about $ 120 billion this year as foreign investors seek returns in the country’s markets, underscoring the risk of contagion.

Meanwhile, Kaisa Group Holdings, a Chinese real estate developer, asked investors for more “time and patience” last night as it sold assets to ease the liquidity crunch. Kaisa is a big borrower in the international bond markets and faces around $ 3 billion in bonds maturing next year.

Separately, Fed Governor Randal Quarles announced yesterday that he would leave the US central bank next month. The departure of Quarles, who was appointed by former President Donald Trump in 2017, creates another opening for the Biden administration to fill amid uncertainty over the institution’s direction.

  • Go further: In today’s Unhedged email, Robert Armstrong highlights the panic gripping the Chinese junk bond market.

  • Comment: Joe Biden is expected to re-elect Jay Powell for a second term as Fed chairman, the FT editorial board said.

Do you think that the tensions in the Chinese real estate sector present global risks? Tell me what you think [email protected]. Thanks for reading FirstFT Americas. Here’s the rest of today’s news – Gordon.

Five other articles in the news

1. The S&P 500 winning streak Yesterday, the blue chip index rose 0.1%, enough to mark an eighth consecutive record – the longest streak of closing records since 1997. The S&P 500 has now closed at a record high 65 times this year, according to the S&P analyst. Howard Silverblatt – the second highest total in history.

2. Tesla shares slide One company to miss the rally was Tesla. Its shares closed down nearly 5% yesterday after millions of Twitter users polled by chief executive Elon Musk concluded he should sell 10% of his stake in the electric automaker. The fall in the share price wiped out nearly $ 60 billion from the value of the electric automaker.

3. Trump’s national security adviser subpoenaed The Congressional committee investigating the January 6 attack on the U.S. Capitol issued subpoenas to six allies of Donald Trump, including his former national security adviser Michael Flynn and Jason Miller, one of his closest associates of the former president.

4. Ukrainian and Russian accused of ransomware attacks
The US Department of Justice has indicted two men over their alleged involvement in large-scale ransomware attacks, including the Kaseya hack in July. U.S. authorities said the two were part of Sodinokibi / REvil, a prolific Russian-linked ransomware gang that has also been blamed for a crippling attack on meat supplier JBS.

5. Mexico’s once-roaring auto industry is going through tough times Once a magnet for billions of dollars in investment and rapid job creation, Mexico’s monthly auto production and sales are languishing at their lowest level in a decade as the industry is hit by the pandemic and the semiconductor chip shortages.

Summary of COP26

  • A global agreement to be eliminated new car emissions by 2040 is struggling to attract support from the world’s largest automakers and governments, including the United States and China.

  • IndonesiaS’s adventure in renewables was cut short by the lack of an agreement to sell its electricity to the state utility.

  • Former US President Barack obama said young people had “the most important energy” in the battle against climate change, in a rousing speech in Glasgow.

Barack Obama receives a standing ovation after his speech: “Vote as if your life depends on it, because it is,” he said © REUTERS

Today Moral Money, our sustainable finance newsletter, has five things to look out for at COP26 this week. Click on here to read and subscribe to the newsletter, published every day of the week during the Glasgow summit.

The day to come

Earnings The largest cryptocurrency exchange in the United States, Coinbase, is releasing its third quarter results today. DoorDash, America’s largest food delivery group, is also reporting results.

Macron will address France French President Emmanuel Macron is due to address the nation about his economic reform plan and the rise in infections in the coronavirus pandemic. (Reuters)

What else do we read

“An incredible feeling” Families, couples and friends rushed to reunite after the United States’ pandemic-era border controls were lifted yesterday that banned most travelers from the UK and Europe. We had reporters at Chicago O’Hare International Airport, New York John F Kennedy International Airport, and London Heathrow.

Michael Williams kisses his friend and business partner Craig Pettigrew at Chicago O'Hare International Airport

Michael Williams kisses his friend and business partner Craig Pettigrew at Chicago O’Hare International Airport © Claire Bushey / FT

Different readings of inflation by central bankers Policymakers have described radically different responses to the global inflation spike, with senior US and UK officials signaling that interest rates are set to rise soon when it is a “completely different” situation in the world. the euro zone.

The investment industry is getting tougher on the climate Tired of having low-key conversations with companies about emissions and how global warming will affect long-term valuations, many investors are now threatening to divest. Their change in attitude could have huge ramifications for global businesses.

China’s self-isolation is a global concern Beijing’s zero Covid policy hurts international trade and global governance, writes Gideon Rachman. And as the outside world evolves into a life with low levels of disease, contact with foreigners may seem even more dangerous for China.

Don’t throw away the chintz – or the Billy library Ikea operates an international program to take back used items and resell them under the name “Buy Back and Resell”. It’s quite a turnaround for the global furniture superpower in the name of sustainability. But if Ikea now feels the need to atone for its past, what about you, the consumer?

Home & Home

Take a look at these five houses for sale with literary links. They range from a Georgian house in Berkshire where Jane Austen was a frequent guest to John Steinbeck’s cottage on Long Island.

Itzer Award-winning novelist John Steinbeck called this cottage “my little fishing spot” in his 1962 book Travels with Charley

Pulitzer Prize-winning novelist John Steinbeck called this cottage “my little fishing spot” in his 1962 book Travels with Charley.

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