Daily Market Outlook, March 6, 2023

Modest China Growth Target Puts A Dent In Metals & Commodities

Asian equities carried over the strength seen a the close of trading last week on Wall Street, once again the Nasdaq was the outperformer stateside, the positive impetuous in Asian markets waned somewhat as China reduced its economic growth target to circa 5%, this underwhelmed investors as the China re-opening narrative and growth expectations underpinned Asian markets last week, the reduced growth target is now set at the slowest pace in in nearly two decades, the move has led to investors paring exposure to commodities and metals the go to proxies for the China reopening plays.

The key investor focus for the week ahead will be on the next US Non Farm payrolls report, Friday, this report will be particularly parsed following the upside surprise seen in payrolls data for January. A robust read in February will only add to inflationary pressures giving the Fed further cover to maintain their higher for longer rates mantra. Ahead of Friday’s report, Fed Chair Jerome Powell will give his semi-annual report on monetary policy to Congress on Tuesday and the Senate on Wednesday, markets expect that the Fed Chair will likely stick to the well worn script regarding progress in the inflation battle but that Fed remain data dependent and as such it is too early to declare victory, whilst nascent signs of disinflation are developing, the broader inflation picture remains challenging and well above the 2% mandated target.

In the UK, construction PMI data for February is due this morning, in January the headline confirmed contraction printing under the pivotal 50 level, investors are poised for another sub 50 print as the restrictive rates environment and cooling in the housing market continue to act as headwinds to sentiment. In the Eurozone, investors will eye the January retail sales report, market expectations for a January uptick follows the dire 2.7% decline in December and will likely mean that net sales activity will still be negative on the year. The German Sentix survey, is believed to post a fifth successive monthly advance, (Bloomberg consensus: -5.5 vs -8.0 in December), which would deliver the best sentiment levels seen in over the past 12 months.

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