Global stock markets pause as China’s growth goal disappoints

BLOOMBERG

Global stock markets paused on Monday after last week’s rally, as investors waited to see if US Treasury yields would extend their declines off recent highs and assessed the potential impact of China’s modest new economic growth target.
Europe’s Stoxx 600 index firmed slightly, while futures contracts on the S&P 500 and Nasdaq 100 traded around flat, struggling to build on Friday’s rally in the underlying indexes, after Chinese leaders set a lower-than-expected economic growth goal, that implied Beijing is unlikely to deploy large-scale stimulus.
While that hurt commodity prices, and weighed on mainland Chinese shares, some analysts also reckon it may prevent another bout of price growth stemming from the world’s No. 2 economy. “The announcement may disappoint some investors but on the other hand, it could ease some fears of a strong inflationary impact from China,” Kristoffer Kjaer Lomholt, head of FX and corporate research at Danske Bank, told clients in a note.
US 10-year Treasury yields slipped further below the psychologically key 4% level, to stand around 3.93% after a measure of prices on Friday showed service providers’ costs rising at a slower pace. That had also helped the S&P 500 snap a three-week losing streak, while the Nasdaq 100 scored its best day since early February. Bloomberg’s dollar gauge was flat, after losing 0.8% last week. Euro zone bonds also firmed as investors trimmed wagers on peak interest rates in the bloc.
Investors are waiting to see if this week’s Fed Chair Jerome Powell’s testimony to the Senate and House committees echoes recent hawkish comments from other Fed officials. However, current market pricing is for interest rates to rise to 5.4% — in line with the amount of tightening Fed officials have suggested will be necessary. A 25 basis-point rate rise is fully priced for the Fed’s March 21-22 meeting, with the outside chance of a 50 basis-point move. “Powell could surprise markets this week with his testimony but they have already set it up so they hike in 25 basis-point increments,” Nikko Asset Management chief strategist John Vail said on Bloomberg Television. Vail predicted monthly payrolls data due on Friday would show a far softer figure than the previous month, “and that may calm down some of the fears of the Fed.”
Meanwhile, commodity markets felt the heat from China’s new growth target, with prices for iron ore, crude oil and copper softening. A Bloomberg index of commodities declined as much as 1%, while the commodity-sensitive Australian and New Zealand dollars lost ground.
In European markets, optimism was also tempered by a fresh slide in the shares of embattled Credit Suisse Group AG, after news that Harris Associates had sold its entire stake in the lender after about two decades of ownership. US premarket trading saw a boost for shares in Apple and Tesla Inc. The former is gearing up to launch its next slate of laptops and desktops, while the electric carmaker has slashed prices for the second time this year. S&P 500 futures were little changed as of 4:37 am New York time and Nasdaq 100 futures were little changed. While futures on the Dow Jones Industrial Average were little changed, the Stoxx Europe 600 rose 0.1% and the MSCI World index rose 0.2%. While the S&P 500 futures were little changed, Nasdaq 100 futures were little changed and the MSCI Asia Pacific Index rose 0.7%. The MSCI Emerging  Markets Index also gains 0.5%.
The Bloomberg Dollar Spot Index was little changed and the euro was little changed at $1.0637. The British pound was little changed at $1.2030 and the Japanese yen fell as much as 0.1% to 136.04 per dollar. The offshore yuan fell 0.6% to 6.9363 per dollar.