Lower China Growth Spooks Markets

This is source I found from another site, main source you can find in last paragraph

Monday March 6: Five things the markets are talking about

With geopolitical risk dominating early trading – North Korea fired four ballistic missiles into nearby waters – this is another busy economic event week that see’s an RBA (Monday 10:30pm EST) and an ECB (Thursday 7:45am EST) rate decision and an U.S non-farm payroll print (Fri. 8:30am).

Expect ECB’s Draghi to come under some pressure after last month’s flash-CPI data printing +2% on the year thanks largely to increases in energy and food prices.

With Fed Chair Yellen almost assuring a Fed rate hike this month (Mar 14-15) after her statements last week, this Friday’s U.S jobs report is anticipated to make that decision a slam-dunk. U.S Employers are expected to add around +190k workers to payrolls, in line with the average over the past six-month.

Elsewhere, Japan will posts its second estimate of Q4 growth, while China will release both consumer and producer prices. Canada’s labor force data for Feb. will be released on top of NFP.

1. Mixed results for global stocks

Asian bourses saw some mixed results in overnight trading.

In Japan, shares fell in thin trade as the yen (¥113.75) firmed and as global geopolitical tensions rose after North Korea fired four missiles. The Nikkei share average fell -0.5% while the broader Topix shed -0.2%.

In Hong King, stocks gained as China optimism offset concerns on U.S rates and N. Korea. The Hang Seng index rose +0.2%, while the China Enterprises Index gained +0.3%.

In Europe, equity indices are trading generally lower. Shares of Deutsche Bank is the notable laggard in the Eurostoxx after confirming plans to raise +€8B through a rights issue. Commodity and mining stocks are weighing on the FTSE 100 as copper prices trades sharply lower intraday

U.S stocks are set to open in the red (-0.2%).

Indices: Stoxx50 -0.2% at 3,396, FTSE -0.3% at 7,354, DAX -0.3% at 11,993, CAC-40 -0.3% at 4,982, IBEX-35 +0.1% at 9,811, FTSE MIB -0.4% at 19,592, SMI -0.1% at 8,661, S&P 500 Futures -0.2%

2. Oil falls on lower China growth targets

Oil prices are under pressure, wiping out most of Friday’s gains; amid worries that lower growth targets in China (see below) could cut oil demand and ongoing concern over Russia’s compliance with a global deal to cut oil output.

Brent crude futures have dropped -47c, or -0.8%, to +$55.43 a barrel, while U.S West Texas Intermediate (WTI) crude futures fell -47c, or -0.9%, to +$52.86 a barrel.

Note: Russia’s energy ministry released figures last week that showed February oil output was unchanged from January at +11.11m bpd – this is casting doubt on Russia’s moves to rein in output as part of a pact with OPEC.

The markets remains range bound and expect dealers to take their cue from the dollars direction.

Ahead of the U.S open, gold (+0.1% to +$1,233.18) is little changed, supported by safe haven interest amid rising geopolitical tensions over North Korea and a weaker dollar. On Friday, the yellow metal hit +$1,222.51, the lowest since Feb. 15, on signals of a hike in U.S interest rates this month.

Note: Data Friday showed that both hedge funds and money managers boosted their net long position in COMEX gold to the highest in over three-months.

3. Rate differentials to dominate

The probability of a Fed rate hike this month has jumped from +35% at the beginning of last week to currently over +80% after a spate of hawkish commentary from Fed officials supporting the notion of a ‘live’ FOMC meeting on March 14-15. Expect Friday’s NFP print to determine whether FI dealers have priced their curves correctly. Yields on 10-year Treasuries fell one -1bps to +2.47%.

This week, the ECB is likely to keep policy unchanged this week, even after eurozone inflation hit the key desired +2% mark last month. Expect ECB’s Draghi to likely stress the four criteria for fighting low inflation that he outlined in January. To date, none of the four criteria have been met so far. The market expects some tweaks to the ECB’s take on the regions economy and rate guidance may be less ‘dovish.’

Note: 10-year Bund yields have been rising from a low of +0.18% in late February to a high of +0.36% last week, driven by increasing expectations of an interest rate increase by the Fed in March.

Down-under, fixed income markets are pricing in about a +20% chance of an RBA rate hike before the end of 2017 and also see about +50% chance of a hike by the end of Q1 of 2018. The RBA meets today (10.30pm EST). Aussie 10-year bonds are little changed at +2.80%.

4. ‘Big’ dollars mixed results

The USD trades mixed ahead of the U.S open. The world’s reserve currency of choice is trying to consolidate its gains from last weeks Fed-inspired rally where Ms. Yellen virtually confirmed the Fed’s intentions to raise rates this month.

The EUR (€1.0592) is finding some support on the back of France’s political center looking less fragmented – Juppe (Conservative) confirmed he would not run for President – and with the ECB meeting this week to be “less” dovish because of stronger global inflation and calmer peripheral sovereign spread markets.

The Pound (£1.2227) continues to hover atop of its two month low outright after weak U.K data from last week. For sterling traders, the focus will be on Chancellor of the Exchequer Hammond’s budget statement on Wednesday (7:30am EST).

USD/JPY (¥113.85) is softer on Korean Peninsula jitters. North Korea said to have fired 4 missiles into eastern Japanese sea.

5. China lowers 2017 GDP, M2, and Retail Sales targets

At the National People’s Congress (NPC) this weekend, China adjusted its economic target for 2017. They expect a GDP target of “around +6.5% or higher if possible” vs. +6.5-7.0% in 2016. Leaders also lowered M2 money supply to +12% from +13% and retail sales to +10% from +11%. However, authorities have kept its CPI target and Fiscal Budget deficit to GDP ratios unchanged at +3% each. The PBoC has pledged to pursue “prudent, neutral monetary policy in 2017.” The Defense Ministry’s 2017 growth was set at +7%, down from +7.6% last year and the lowest in a decade.

Leaders also expressed a continued commitment to reducing pollution, with that in mind, regulators also announced cuts in steel capacity by another -50M tons and coal output by over -150M tons.

Premier Li has dropped a pledge he had made in similar speeches in the past three-years to ensure that the yuan “remains generally stable at an appropriate and balanced level”. This suggests China’s government is ready to tolerate further declines in the yuan value against the dollar.

Forex heatmap

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This is source I found from another site, main source you can find in last paragraph

Source : http://www.marketpulse.com/20170306/lower-china-growth-spooks-markets/

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