EMEA Morning Briefing : Stock Futures Lower as China Sets Ambitious Growth Target

MARKET WRAPS

Watch For:

Services PMI data for EU, Germany, France, Italy, UK; EU PPI; France industrial production; trading updates from Thales Group, Bayer, Traton, Intertek Group, Fresnillo, Sibanye-Stillwater, Hiscox, Ashtead Group

Opening Call:

European stock futures fell early Tuesday after China kept its 2024 growth target at around 5%. Asian stock benchmarks largely declined; the dollar steadied; Treasury yields were little changed; while oil and gold futures fell.

Equities:

Stock futures declined early Tuesday, tracking Asian equities lower after China set an ambitious growth target of around 5% for this year, a goal that economists say will require more policy support as challenges mount.

The government growth target is closely watched as a signal of Beijing's optimism about the Chinese economy's trajectory, and its willingness to stimulate business activity.

Other events this week in investors' sights include Wednesday's U.K. spring budget, Thursday's European Central Bank meeting and Friday's U.S. jobs report. Federal Reserve Chair Jerome Powell's congressional testimony later this week is also in focus.

Forex:

The euro could fall if the ECB discusses the conditions for cutting interest rates at Thursday's meeting but any declines will be limited, ING said.

ECB President Christine Lagarde could reiterate that there is still missing evidence from data and refrain from offering clearer guidance on monetary policy easing. "This means that the impact in FX should not be particularly long-lasting," ING said.

U.S. data may be the key catalyst for swings in EUR/USD before eurozone wage and inflation data this month and in April. U.S. nonfarm payrolls data Friday may have a larger impact on EUR/USD than the ECB announcement, ING said.

Bonds:

If the Fed signals that interest-rate cuts are coming soon, markets would price in higher inflation expectations, causing longer-term yields to rise faster than shorter-term ones, a troublesome development for credit markets, said T. Rowe Price's Mike Sewell.

"The last thing that fixed-income investors want to see is a bear steepener," he said. Sewell focuses on TIPS markets, which he says are showing investors believe U.S. monetary policy isn't tight enough. "The market is saying that the disinflation that we've seen...is likely to stall out unless something changes in terms of tightening financial conditions." Sewell expects the Fed to start cutting only in 2025.

Energy:

Oil futures declined in Asia as traders gauge developments from China's National People's Congress meeting. China announced an economic growth target of around 5% for 2024, unchanged from the previous year and widely expected by analysts.

Meanwhile, subdued global oil demand growth will likely be the main challenge to OPEC+'s policy, CBA analyst Vivek Dhar said, noting the group's latest decision to extend oil-production cuts.

Metals:

Gold fell early Tuesday after settling at a record high. Citi still likes the precious metal as a hedge against a recession in developed markets as well as increasingly for uncertainty surrounding U.S. elections this year. The U.S. bank remains medium-term bullish on gold and assigns a 25% probability that the metal will average $2,300/oz in 2H.

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Copper declined in Asian trade. The market is focusing on any new policy measures from China's Two Sessions to support the property and infrastructure sectors, which will affect demand for copper, ANZ said.

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Iron-ore futures rose, with the market showing some signs of buying while remaining focused on China's Two Sessions meeting, Westpac said. While China's property concerns remain a challenge for steel and iron ore demand, slowing growth in iron-ore supply could keep the market tight and limit any downside to prices, ANZ said.

TODAY'S TOP HEADLINES

China Sets Ambitious 5% Growth Target for 2024

BEIJING-China set an economic growth target of around 5% for the year, unchanged from the previous year, a goal that economists say will require more policy support as challenges mount.

This year's goal, announced Tuesday by Premier Li Qiang at the start of the country's annual legislative session, is higher than the International Monetary Fund and World Bank's estimates for Chinese growth this year, suggesting confidence among Chinese leaders about their ability to turn the economy around at a time of widespread pessimism about the country's future.

Fed has the luxury of making policy without pressure of urgency, Bostic says

With the labor market strong and growth above trend, there isn't pressure on the U.S. central bank to cut interest rates, Atlanta Fed President Raphael Bostic said Monday.

"The good news is the labor market and economy are prospering, furnishing the FOMC the luxury of making policy without thepressure of urgency," Bostic said in a new essay posted on his regional bank's website.

Bitcoin Record High in Sight as Crypto Rally Gives Dogecoin and Other Tokens a Sharp Boost

Bitcoin and other cryptocurrencies marched higher Monday as the crypto rally continued, with record highs in sight as digital assets benefit from inflows into recently approved spot Bitcoin exchange-traded funds.

The price of Bitcoin has surged nearly 7% over the past 24 hours to $67,500, with the largest crypto closing in on its record peak above $69,000 reached in November 2021. Bitcoin has climbed steadily since last summer, but gains have been supercharged in recent weeks amid jubilant sentiment across wider markets-with the S&P 500 and Nasdaq stock indexes at record levels-and the impact of spot Bitcoin ETFs.

Apple Fined $2 Billion in One of Europe's Largest Antitrust Actions

BRUSSELS-The European Union fined Apple about $2 billion, saying the iPhone maker set unfair rules for developers of music-streaming apps. The fine was one of the EU's largest-ever antitrust penalties.

The move could mark the start of a wider battle between the bloc's regulators and the tech giant.

Former Twitter Executives Sue Musk Over Unpaid Severance

Four former top Twitter executives sued Elon Musk, saying he owes them a collective more than $128 million in severance.

The executives, who led the company during a lengthy and at times hostile takeover process in which they sued the billionaire to follow through with the acquisition after Musk changed his mind, say he fired them citing gross negligence and willful misconduct, which they deny. Musk said at the time they were fired for cause and he didn't have to pay severance.

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Expected Major Events for Tuesday

00:01/UK: Feb BRC-KPMG Retail Sales Monitor

00:01/UK: Feb Scottish Retail Sales Monitor

01:01/IRL: Feb Ireland Services PMI

07:30/HUN: 4Q GDP

07:45/FRA: Jan Industrial production index

08:00/CZE: 4Q Wages

08:15/SPN: Feb Spain Services PMI

08:45/ITA: Feb Italy Services PMI

08:50/FRA: Feb France Services PMI

08:55/GER: Feb Germany Services PMI

09:00/EU: Feb Eurozone Services PMI

09:00/ITA: 4Q GDP

09:00/UK: Feb UK monthly car registrations figures

09:30/UK: Feb UK Official Reserves

09:30/UK: Feb S&P Global UK Services PMI

10:00/EU: Jan PPI

10:00/CYP: Feb Registered Unemployed

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

03-05-24 0019ET