As investors (Bond and stock yields) processed China’s lower-than-expected growth target. And switched their attention to Jerome Powell’s testimony and this week’s U.S. jobs data, and global stock prices. And Bond and stock yields declined on Monday.
China’s growth goal for this year is around 5%. Which is lower than expected and less than the goal established for the previous year, which was about 5.5%.
After initially rising, European equities fell. By 12:27 GMT, the pan-European STOXX 600 index (.STOXX) was down 0.2%, and S&P 500 futures were also slightly lower.
Government Bond and stock yields increased in value, and after last week’s jump above 4%. The yield on 10-year Treasuries, which swings inversely to its price, dropped 4 basis points to 3.92%.
Another indicator of dissatisfaction with China’s growth aim is the reduction of more than 1% in oil prices.
Danske Bank’s chief analyst and head of corporate research Kristoffer Kjaer Lomholt stated the market’s mood. On Monday was “influenced by the modest, revised growth objective in China indicating a diminished possibility of fresh stimulus.”
The announcement may disappoint some investors. But it may also allay some worries about a significant inflationary impact from China, said Lomholt.
Nonetheless, the current run of data has been solid enough to maintain investors’ modest optimism, drastically lowering expectations of recession.
The STOXX index was still very close to reaching its best level since February 2022. While the.MIAPJ0000PUS, the broadest index of Asia-Pacific equities outside of Japan, increased by 0.5%.
Prior to Fed Chairman Powell’s important speech and this week’s policy announcements from Japan. Australia, and Canada, the focus was squarely on central banks.
The Fed’s higher peak interest rate has become market consensus, but the markets are expecting it would stick to quarter-point rises rather than half-point increments.
On Saturday, San Francisco Fed President Mary Daly emphasized that rates might need to rise. But she also set a high bar for returning to half-point rises.
It is now ready for Powell’s hearing before Congress on Tuesday and Wednesday. When he will undoubtedly be questioned on the necessity of further hikes.
But a lot could hinge on what the U.S. payrolls report for February indicates on Friday. Although January’s 517,000-point surge caused markets to reassess their interest rate expectations. Forecasts are centered on a more moderate increase of 200,000, but there is a chance that this might change.
The February inflation report will come after that on March 14.
Powell is likely to refrain from committing to a policy course because his testimony will take place before the payrolls and inflation statistics, according to Jan Nevruzi, an analyst at NatWest Markets.
Payrolls are due on the last day that Fed officials are permitted to openly discuss monetary policy, but CPI data will be provided during this time. The conclusion of the Fed meeting would become even more difficult to anticipate if the jobs and inflation statistics come out in contradiction.
The dollar index, which compares the performance of the dollar against six other currencies, was in a holding pattern at 104.63, while the euro held steady at $1.0640, barely above a recent seven-week low.
FLURRY CENTRAL BANK CHINA
The Fed is not alone in predicting additional tightening.
Head of the European Central Bank Christine Lagarde stated in an interview that the bank had more work to do on inflation and that it was “highly likely” that interest rates will increase by 50 basis points this month.
Mario Centeno, governor of the Portuguese central bank and a member of the governing council stressed that choices made after March must be supported by statistics. And emphasized the significance of taking into account the economic forecasts the bank will give in March.
The Bank of Canada has paused this week after raising rates at a record pace of 425 basis points in 10 months, while Australia’s central bank is anticipated to increase rates by 25 basis points on Tuesday.
Then, on Friday, Bank of Japan (BOJ) Governor Haruhiko Kuroda holds his final policy meeting before Kazuo Ueda assumes leadership in April. At this meeting, all eyes will be on the outcome of the BOJ’s yield curve management tool.
When the BOJ abruptly increased the range of trading allowed for 10-year Bond and stock yields to between -50 and +50 basis points in December, it startled the markets.
Ueda has so far sounded pessimistic about the direction of policy, which has maintained the yen on a softening trend. After reaching a three-week low of 137.10 last week, the yen started the week lower by 0.2%.
With Bond and stock yields declining, gold was last down 0.2% at $1,850 an ounce but was still trading above last week’s lows.