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Global stocks and bonds yields fall as investors balance China, central banks

Agencies . London
07 Mar 2023 00:00:00 | Update: 07 Mar 2023 00:06:19
Global stocks and bonds yields fall as investors balance China, central banks

World share prices and bond yields edged lower on Monday as investors digested a lower-than-expected growth target from China and the focus turned to testimony from Federal Reserve Chairman Jerome Powell and US jobs data this week.

China set this year's growth target at around 5%, at the low end of expectations and below last year's target of around 5.5%.

European stocks dropped after an initial rise, with the pan-European STOXX 600 index (.STOXX) down 0.2% by 1227 GMT, while S&P 500 futures also inched lower, reported Reuters.

Government bonds rallied, with the yield on 10-year Treasuries, which moves inversely to its price, down 4 basis points to 3.92%, after last week's spike above 4%.

Oil prices also dropped by more than 1%, another reflection of disappointment with China's growth target.

Kristoffer Kjær Lomholt, head of FX, corporate research and chief analyst at Danske Bank, said Monday's market sentiment "is dominated by the modest, revised growth target in China highlighting a diminished likelihood of more stimulus,"

"The announcement may disappoint some investors, but on the other hand, it could ease some fears of a strong inflationary impact from China," Lomholt added.

Still, the recent run of data, which has significantly reduced expectations of a recession, has been strong enough to keep investors relatively optimistic.

The STOXX index was still near its highest since February 2022 and MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.5%.

Focus was firmly on central banks, ahead of a key speech by Fed Chairman Powell and policy decisions this week from Japan, Australia and Canada.

Markets have become resigned to a higher peak interest rate from the Fed, but are hoping it will stick with quarter-point increases, rather than half-point hikes.

San Francisco Fed President Mary Daly on Saturday reiterated rates may have to go up, but set a high bar for moving back to half-point increases.