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STOXX 600 gains 0.1%
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FTSE underperforms, miners lag
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China sets growth target of around 5%
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Wall St futures steady
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SKY'S THE LIMIT: 'BALLOONING' FOCUS ON CHINA (0954 GMT) While markets are underwhelmed with the 5% growth target set by China for 2023 on Sunday as it kicked off its National People's Congress, the low target means the government could scale back policy support this year because a brighter outlook lowers the need for it, said Tianchen Xu, China economist at the Economist Intelligence Unit. "The fiscal strain is a bigger issue than ever, and although the nominal levels of budget deficit and special bond arrangement is higher, actual fiscal stance should be towards tightening because authorities are unlikely to introduce the extraordinary tools that they did in 2022," Xu told the Reuters Global Markets Forum (GMF). The figure was shy of last year's target of about 5.5%, and sources had recently told Reuters a range as high as 6% could be set. The lack of fiscal stimulus to consumers will preclude growth of above 6%, said Xu.
The low target is also a sign that short-term growth is not all that important this year, he stated.
"In 2021, the line of thinking was similar: while announcing a low growth target, policymakers sought to push for reform on tech, tutoring and property. This time, reform could happen in areas like population, public finance and a financial sector overhaul." Institutional reshuffling later this week will offer important clues in that regard, added Xu.
Front and center is also geopolitics, said Xu, adding that as tensions between the U.S. and China flare up and Taiwan and U.S. elections near, inter-state frictions over technology, spreading over into financial services, is a certainty.
"The Taiwanese elections will raise cross-Strait tensions, and a DPP (Democratic Progressive Party) victory with expected president elect Lai Ching-te adopting a much more pro-independence stance will also spook investors." That means investors need to be highly wary of major reform in China this month that could shape the next five years, he added.
(Anisha Sircar)
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STEADY START FOR STOXX 600 (0848 GMT) European shares have started the week in a relatively upbeat mood, with most of the major bourses trading with small gains.
The pan-European STOXX 600 is up 0.2%, while Germany's DAX , France's CAC 40 , Spain's IBEX 35 and Italy's FTSE MIB are up 0.3%-0.7%. Britain's resource-heavy FTSE 100 underperforms, trading down 0.1%, as mining shares lag in Europe after China set a modest growth target of 5% this year, towards the lower end of expectations.
In company news, Telecom Italia tops the STOXX 600 after the firm received a rival bid for its fixed-line network, while Rolls-Royce shares have gained another 2% to reach their highest level since March 2020.
Here's your opening snapshot:
(Samuel Indyk)
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EUROPE'S STOCK FUTURES TICKING HIGHER (0734 GMT) Equity futures in European are edging up on Monday after China set a modest growth target for 2023, with attention this week on Fed's Powell and nonfarm payrolls.
China set its economic growth target at around 5% at its National People's Congress, towards the lower end of expectations, although recent strong data is keeping investors optimistic on China's economic recovery. Futures on the Euro STOXX 50 are up 0.3%. Futures on Germany's DAX are up 0.2%, France's CAC 40 futures are up 0.4% and Britain's FTSE 100 futures are flat.
In Asia, China's blue-chip CSI 300 dropped 0.5% but MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7%. Wall Street futures are little changed. Eyes this week will be on Friday's payrolls report after last month's blowout number started a ripple that sent bond yields surging and caused a dramatic repricing in expectations for where the Fed's interest rate might peak.
Fed Chair Powell also holds his two-day testimony before Congress on Tuesday and Wednesday.
In company news, Credit Suisse could again be in focus after Harris Associates, one of the Swiss bank's major shareholders, announced it had sold its stake over the past few months.
(Samuel Indyk)
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HOPEFUL MARKET AWAITS POWELL TESTIMONY (0658 GMT)
Investors have found their appetite for risky assets at the start of a crucial week, shrugging off the disappointment of China setting a modest target for economic growth this year, with European stocks set to carry the momentum.
Coming off its best weekly performance since start of the year, the continent-wide STOXX might aim for another record high as traders await January retail sales data for the Eurozone later in the day. Meanwhile, the market's focus is firmly on Fed Chair Powell's two-day testimony before the U.S. congress (on Tuesday and Wednesday) and the February jobs report (due on Friday) that will likely dictate the path of the U.S. central bank for the near future.
While investors have come to accept (sort of) that the Fed will likely keep interest rates higher for longer, there are fresh fears that strong economic data will lead the central bank to go back to jumbo hikes. Hawkish rhetoric from Fed speakers continued over the weekend, with San Francisco Federal Reserve Bank President Mary Daly the latest to sound a warning on the inflationary threat.
The market largely expects Powell to be hawkish this week but given his testimony comes before the jobs report is released, he will likely aim to keep all options open. Over in China, the country's leadership set a 5% target for economic growth this year, which analysts called conservative and pragmatic, as they kicked off the annual session of the National People's Congress. In the corporate world, Italian state lender CDP has bid for the fixed-line network of former phone monopoly Telecom Italia, rivalling an offering from U.S. firm KKR.
Key developments that could influence markets on Monday:
Economic events: Eurozone January retail sales, February S&P Global PMIs for Germany, France and Eurozone Speakers: ECB Chief Economist Philip Lane
(Ankur Banerjee)
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