Global shares have eased below their recent highs as the start of China’s week-long annual session of parliament lacked any big-ticket stimulus plans, leaving investors disappointed, while bitcoin remained tantalisingly close to record peaks.
Equity markets took a knock from a retreat from record highs on Wall Street on Monday as the US Federal Reserve showed no signs of being in a rush to cut interest rates. US stock futures also pointed lower.
Meanwhile, bitcoin hit a two-year peak of $US68,828, just a whisker from a new record, while gold hovered around $2,100 an ounce, near an all-time high of its own.
The Chinese government retained last year’s target for economic growth of “around five per cent” for this year, and announced plans to run a budget deficit of three per cent of economic output, down from a revised 3.8 per cent last year.
It also unveiled plans to issue one trillion yuan ($A214 billion) in special ultra-long term treasury bonds, which are not included in the budget.
Mainland Chinese stocks reversed early losses with the blue-chip CSI 300 up 0.7 per cent, amid signs of suspected state-backed buying of some exchange-traded funds.
In Europe, where many big components of the market have heavy exposure to the Chinese economy, the STOXX 600 fell 0.3 per cent.
The early announcements from China’s NPC suggest “large fiscal stimulus is off the table for now”, said James Kniveton, senior corporate FX dealer at Convera.
“Stability is still the overriding factor in Chinese policy making, and the announcements so far seem to conform to that philosophy.”
Hawkish comments from Atlanta Fed President Raphael Bostic on Monday that there was no urgency to cut interest rates given inflation is above two per cent, served as a reminder that there might not be much respite for investors on the monetary policy front any time soon.
Those remarks frayed nerves before Fed chair Jerome Powell’s testimony to Congress this week as well as a deluge of key data on prices and jobs, culminating with Friday’s non-farm payrolls report.
The dollar index, which measures the US currency against six major peers, edged up 0.1 per cent to 103.92.
The euro eased 0.1 per cent to $US1.0845 before the European Central Bank’s policy meeting on Thursday, at which traders see no change in rates.
Futures imply an 88 per cent probability that cuts will start in June, roughly in line with the timing of the first US cut.
Sterling nudged down 0.1 per cent to $US1.2673 before Wednesday’s UK budget.
Finance Minister Jeremy Hunt has been trying to dampen speculation about big pre-election tax cuts.
Against the yen, the dollar was steady at 150.42, following Monday’s 0.27 per cent climb. The currency pair tends to be extremely sensitive to moves in long-term US bonds.
Benchmark 10-year Treasury yields eased two basis points to 4.195 per cent, about their lowest for two weeks.
Elsewhere, crude oil ticked lower, as demand headwinds counterbalanced a widely expected extension of voluntary output cuts through mid-year by the OPEC+ producer group.
Brent futures were off 0.1 per cent at $US82.72 a barrel, while US futures eased 0.2 per cent to $US78.55 a barrel.
This post was originally published on Michael West.
