Global stock markets were steady on Monday as investors waited to see if Treasury yields would extend last week’s declines and assessed the impact of China’s decision to set a lower economic growth target.
Europe’s Stoxx 600 index opened modestly firmer and US equity futures were little changed, after a Friday rally driven by conviction the Federal Reserve won’t raise interest rates beyond the peak levels already priced in around 5.4%. Meanwhile, Chinese leaders set a lower-than-expected economic growth goal that implied Beijing is unlikely to deploy large-scale stimulus.
While the 5% target hurt commodity prices and weighed on mainland Chinese shares, it may also help prevent another bout of price growth stemming from the world’s No. 2 economic recovery.
“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 have slipped below the psychologically key 4% level as investors looked past a Friday report showing resilience in the service sector and focused instead on a measure of prices that showed service providers’ costs rising at a slower pace. That 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 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.
Key events this week:
- US factory orders, durable goods, Monday
- US wholesale inventories, consumer credit, Tuesday
- Fed Powell’s semiannual Monetary Policy Report to the Senate Banking Committee, Tuesday
- Australia rate decision, Tuesday
- Euro area GDP, Wednesday
- US MBA mortgage applications, ADP employment change, trade balance, JOLTS job openings, Wednesday
- Fed Chair Powell’s semiannual Monetary Policy Report to the House Financial Services Committee, Wednesday
- Canada rate decision, Wednesday
- EIA crude oil inventories, Wednesday
- China CPI, PPI, Thursday
- US Challenger job cuts, initial jobless claims, household change in net worth, Thursday
- Bank of Japan policy rate decision, Friday
- US nonfarm payrolls, unemployment rate, monthly budget statement, Friday
Some of the main moves in markets:
- S&P 500 futures were little changed as of 4:37 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 rose 0.1%
- The MSCI World index rose 0.2%
- S&P 500 futures were little changed
- Nasdaq 100 futures were little changed
- The MSCI Asia Pacific Index rose 0.7%
- The MSCI Emerging Markets Index rose 0.5%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0637
- The British pound was little changed at $1.2030
- The Japanese yen fell 0.1% to 136.04 per dollar
- The offshore yuan fell 0.6% to 6.9363 per dollar
- Bitcoin fell 0.4% to $22,390.83
- Ether fell 0.5% to $1,563.51
- The yield on 10-year Treasuries declined two basis points to 3.93%
- Germany’s 10-year yield declined three basis points to 2.68%
- Britain’s 10-year yield was little changed at 3.85%
- West Texas Intermediate crude fell 0.6% to $79.19 a barrel
- Gold futures rose 0.2% to $1,857.90 an ounce
Source : Yahoo Finance