Asia equities firm, China sets cautious growth target

  • Nikkei at three-month high, S&P 500 futures firm
  • China stalls after Beijing sets a 5% growth target
  • Markets brace for Powell, BOJ, BOC and RBA meetings
  • February payrolls a key test for US interest rate expectations

SYDNEY, March 6 (Reuters) – Asian stocks rose on Monday as bond markets held their breath ahead of an update on US interest rate prospects from the world’s most powerful central banker, and a jobs report that could decide whether the next hike needs to be super-sized.

There was some disappointment that Beijing chose to cut its growth outlook to a 5% target, rather than the 5.5%-plus the market favored, but the recent set of factual data is strong enough to make investors optimistic hold.

Chinese blue chips (.CSI300) fell 0.5% after gaining 1.7% last week. MSCI’s broadest index of Asia Pacific stocks outside Japan (.MIAPJ0000PUS) was still up 0.7%.

Japan’s Nikkei (.N225) climbed 1.2% to a quarterly high, while South Korean equities (.KS11) added 1.0%, helped by weaker inflation.

EUROSTOXX 50 futures rose 0.5%, while FTSE futures remained stable. S&P 500 futures gained 0.2% and Nasdaq futures 0.4%, after rallying on Friday as bond yields fell slightly.

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The 10-year Treasury yield was 3.94%, after last week’s high of 4.09% proved tempting enough to attract buyers.

Markets have resigned themselves to more rate hikes from the Federal Reserve, but hope it sticks to quarter-point moves rather than shifting back to half-point hikes.

San Francisco Fed President Mary Daly reiterated on Saturday that rates should rise, but set the bar high to move to half-point hikes.

Futures imply a 72% chance that the Fed will go 25 basis points at its March 22 meeting.

All this sets the tone for Fed Chairman Jerome Powell’s testimony before Congress on Tuesday and Wednesday, where he will no doubt be asked if bigger hikes are needed.

However, a lot could depend on what the February salary report reveals on Friday. Forecasts point to a more modest rise of 200,000 after January’s stormy jump of 517,000, but the risks are on the upside.

And that’s followed by the February CPI report on March 14.

KURODA bends forward

“Powell’s testimony comes before payrolls and inflation numbers, which is why he will likely avoid committing to a policy path,” said Jan Nevruzi, an analyst with NatWest Markets.

“Payrolls are due on the last day Fed officials can publicly discuss monetary policy, but CPI will be released during the blackout period,” he added. “If we get into a situation where jobs and inflation numbers are contradictory, the outcome of the Fed meeting could be even more difficult to predict.”

The Fed is not alone in warning of further tightening.

In an interview released this weekend, Christine Lagarde, president of the European Central Bank, said it was “highly likely” that they would raise rates by 50 basis points this month and that the bank had more work to do on the matter. of inflation.

Australia’s central bank is expected to raise rates by 25 basis points on Tuesday, while the Bank of Canada is taking a break after raising rates at a record 425 basis points in 10 months.

Friday is the final policy meeting for Bank of Japan Governor Haruhiko Kuroda before Kazuo Ueda takes the reins in April, and all eyes are on the fate of his yield curve control (YCC).

“No change is expected, but we should not completely rule out Kuroda going out with a bang via the BoJ announcing another adjustment to the 0% YCC tolerance band,” NAB analysts noted in a note.

The BOJ shocked markets in December when it unexpectedly widened the allowable trading margin for 10-year bond yields to between -50 and +50 basis points.

So far, Ueda has sounded dovish on the outlook for policy, keeping the yen on a softer trend. The dollar was last at 135.61 yen after hitting a quarterly high of 137.10 last week.

The euro remained at $1.0643, close to its recent seven-week low of $1.0533, while the dollar index was marginally lower at 104.430.

Friday’s drop in bond yields helped gold regain some ground and it traded at $1,855 an ounce.

Oil prices fell, with investors perhaps disappointed that China did not set itself more ambitious growth targets.

Brent fell 62 cents to $85.21 a barrel, while US crude fell 59 cents to $79.09 a barrel.

Reporting by Wayne Cole; Edited by Shri Navaratnam

Our Standards: The Thomson Reuters Principles of Trust.





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