Stocks Pause as China’s Growth Goal Disappoints : Markets Wrap

(Bloomberg) — Global stock markets were steady on Monday as investors waited to see if Treasury yields would extend last week’s declines and assessed the impact of China’s decision to set a lower economic growth target.

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Europe’s Stoxx 600 index opened modestly firmer and US equity futures were little changed, after a Friday rally driven by conviction the Federal Reserve won’t raise interest rates beyond the peak levels already priced in around 5.4%. Meanwhile, Chinese leaders set a lower-than-expected economic growth goal that implied Beijing is unlikely to deploy large-scale stimulus.

While the 5% target hurt commodity prices and weighed on mainland Chinese shares, it may also help prevent another bout of price growth stemming from the world’s No. 2 economic recovery.

“The announcement may disappoint some investors but on the other hand, it could ease some fears of a strong inflationary impact from China,” Kristoffer Kjaer Lomholt, head of FX and corporate research at Danske Bank, told clients in a note.

US 10-year Treasury yields have slipped below the psychologically key 4% level as investors looked past a Friday report showing resilience in the service sector and focused instead on a measure of prices that showed service providers’ costs rising at a slower pace. That helped the S&P 500 snap a three-week losing streak while the Nasdaq 100 scored its best day since early February.

Bloomberg’s dollar gauge too retreated further, after losing 0.8% last week.

The impact of China’s cautious growth target was felt most on commodity markets, with prices for iron ore, crude oil and copper softening. A Bloomberg index of commodities declined as much as 1%, while the commodity-sensitive Australian and New Zealand dollars lost ground.

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In European markets, optimism was also tempered by a fresh slide in the shares of embattled Credit Suisse Group AG, after news that Harris Associates had sold its entire stake in the lender after about two decades of ownership.

The week ahead could be crucial for markets, potentially…


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