FTSE -17 points at 7257
DAX -55 points at 11972
CAC -9 points at 4986
Euro Stoxx -12 points at 3391
China revised its 2017 growth target slightly lower to 6.5% and more if possible, from 6.5%-7% a year earlier. The inflation target has been kept at 3% year-on-year; the retail sales growth target remained stable at 10%. The People’s Bank of China (PBoC) lowered the M2 money supply target down to 12% and is expected to further tighten the monetary policy in order to ease the recent rise in inflationary pressures due to the sharp U.S. dollar appreciation and the recovery in global oil and commodity prices.
Also, a tighter monetary policy would reduce the bad loans and speculative bubbles. Chinese Premier Li has also signaled further liberalization of the yuan’s exchange rate. News was encouraging for investors, as further financial and regulatory reforms are the major caveats for foreign investors, and it appears that China is decidedly taking measures to allow a good basis for new investments. As a result, China is seeking 6.5% stable and balanced growth.
Chinese stock markets opened the week on a positive note. Shanghai's Composite (+0.24%) and Hang Seng index (+0.30%) gained as the Yuan traded below 6.90 against the U.S. dollar.
Meanwhile, the U.S. dollar strengthened across the board after the Federal Reserve (Fed) Chair Janet Yellen left little to imagination regarding an interest rate hike in March. In addition, Yellen also hinted that there could be more tightening in 2017, meaning that the Fed could raise rates more than three times anticipated by the markets. The U.S. 10-year yields are now ready to successfully test the 2.50%.
The U.S. stocks were flat at Friday’s close. The Dow Jones futures (-0.21%) and the S&P 500 futures (-0.37%) traded softer in Asia, while the VIX index fell by 7.20%, hinting at no signs of stress for a sharp headwinds for the moment.
Gold extended losses to $1222 on Friday and recovered above the $1230 in Asia following a slim flight to the safe haven after North Korea fired four ballistic missiles into the Sea of Japan.
The yen (+0.19%) has been the only G10 gainer against the greenback. The USD/JPY remained capped at 114.14 in Tokyo. The positive momentum is losing pace as the 50-day moving average (113.75) is testing the 100-day moving average on the downside. Solid offers are presumed pre-115.00 level.
Nikkei (-0.46%) and Topix (-0.20%) retreated on stronger yen.
The AUD/USD rebounded from 0.7546 (200-day moving average) on Friday and is expected to see support before the Reserve Bank of Australia (RBA) meeting due tomorrow. The RBA is expected to keep the cash rate unchanged at 1.5%, yet stay accommodative given that the recent recovery in commodity prices haven’t fully translated into the economic performance. With the U.S. trade worries looming, we expect the RBA to play safe. Therefore, the RBA may lack an encouraging surprise for the carry traders.
Stagnation in Aussie yields discourages the fresh buyers, especially given that the U.S. yields improve on hawkish Fed. Below the 200-dma, AUD/USD traders could target the key 0.7517 support, major 38.2% retracement on December to February recovery. This level will distinguish between a potential rebound and a mid-term bearish reversal against the U.S. dollar.
Cable consolidated losses in the tight range of 1.2277/1.2301 in Asia. Trend and momentum indicators remain comfortably negative, as sellers are touted at the 1.2300/1.2343 (psychological level / Fibonacci 50% level on January – February recovery).
The FTSE 100 stocks traded higher on the back of the weakening pound on Friday, but are set for a soft weekly open in London.
From the corporate world
Deutsche Bank (DE:DBKGn) announced a major capital increase by offering 8 billion euros in stocks, besides its plans to proceed with 22 billion euros worth of cost cutting by 2018, to reorganize the bank by bringing the trading and investment banking back again and to name two deputy CEOs. The idea is to separate the consumer business from the corporate business to adjust margins and boost profits.
Finally, automakers will be in focus today as Peugeot-Citroen agreed to buy GM's (NYSE:GM) Opel and Vauxhall operations. The deal moves the French carmaker to the Europe's second biggest automaker after the German Volkswagen (DE:VOWG_p).